Related Insights
The DXY Index’s two-day decline below 100 despite USD100+ Brent crude prices suggest that markets are wary of a dovish pivot at today’s FOMC meeting. Although Fed Chair Jerome Powell is cautious of falling behind the curve on inflation again, today’s circumstances are different from 2022. The Fed is confronting a less resilient US economy where 4Q25 GDP was revised down to 0.7% QoQ saar from 1.4% initially. February’s non-farm payrolls saw a shock contraction of 92,000 jobs vs. the expected 59,000 gain. With the unemployment rate hitting 4.4% and triggering the Sahm Rule, recession is no longer a tail risk but a baseline concern. Hence, the FOMC may consider the energy price spikes driven by the Iran War more as a consumer tax despite the risks to inflation.
The Reserve Bank of Australia’s decision to hike the cash rate to 4.10% officially cements the AUD as the highest yielding G10 currency and its position as this year’s best performing currency. Even with a 5-4 split vote, the fact that the RBA opted for a proactive "insurance hike" to combat a unique mix of domestic momentum and a global geopolitical conflict demonstrated a level of hawkish resolve that far exceeded its peers. The Iran War is affecting G10 nations differently, with many countries also considering higher energy prices as a consumer tax that slows growth, apart from an inflation risk. For example, while 4Q25 US GDP growth was revised down to 0.7%, Australia saw greater momentum in demand during the same period. Unlike the US’s shock contraction of 92,000 jobs in February, Australia’s unemployment rate remains lower than expected. Particularly, the RBA is more worried that fuel price spikes will de-anchor inflation expectations. Hence, the AUD's highest-yielding status makes it an attractive vehicle for carry trades, providing AUD/USD fundamental support in this month’s 0.6950-0.72 range.
Quote of the Day
"The two most powerful warriors are patience and time.”
Leo Tolstoy
March 18 in history
Most Arab nations ended their oil embargo against the US in 1974.
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