Dollar strength dominates as oil jumps past $100

The dollar extended gains to a two-week high ahead of the anticipated Federal Reserve rate hike, while crude oil jumped past $100 on supply concerns.

Dollar strength persists

• The US Dollar Index (DXY) rose to a two-week high of 99.60, supported by the bond market as traders anticipated the upcoming Federal Reserve rate hike.
• EUR/USD extended its losses, falling below the 100-day Simple Moving Average (SMA) at 1.1555 and opening the door for a potential drop towards 1.1500.
• The pound also weakened against the dollar, with GBP/USD closing near 1.3470, down 0.2% on the session, amid safe-haven inflows into the US currency.
• USD/JPY climbed for a second consecutive day, trading near 155.20. The yen underperformed its G10 peers due to a firmer dollar and rising oil prices.
• USD/CAD extended its advance for a fifth straight day, reaching near a two-week high, firmly supported by the broadly strengthening US dollar.
• The New Zealand dollar continued its decline for a second day, with NZD/USD falling 0.37% and breaking below 0.5800 as risk appetite diminished.
• The Australian dollar, the weakest major on our gauge, slid for a second session to the 0.7120 area and a three-week low, down from the four-month high near 0.7200 it set earlier this month.

Commodities in focus

• Brent held near $110 a barrel, per an ING note, while West Texas Intermediate (WTI) crude oil traded just above $100.00, marking a daily increase of approximately 3% after Saudi Arabia's East–West pipeline shut — the route that lets its crude bypass the Strait of Hormuz, so closing it pushes that supply back through the strait itself.
• Gold (XAU/USD) fell for a second straight session, trading between $4,265 and $4,295 and holding below the $4,300 level it lost overnight, at a one-month low. Rallies were capped by the 100-day SMA at $4,328 as broad dollar strength and elevated US yields did the work.

Economic data and market gauges

• In the UK, the Claimant Count Change showed an actual increase of 27.8K, exceeding the 8.3K forecast. The Average Earnings Index (3m/y) met expectations at 3.9%.
• Our proprietary metrics indicated an MRS of 62, a CTS of 76 — pinned there for seven sessions — and an FSI of 63, signaling 'Greed'.

Ahead of the next session

• Markets now anticipate the Federal Reserve's monetary policy decision, including the Federal Funds Rate, economic projections, statement, and press conference later today. Key US retail sales and UK CPI data are also due.
• It is the first of three central banks this week: the Bank of England follows on Thursday, expected to hold at 3.75%, and the Bank of Japan on Friday, forecast to lift its rate from below 1.00% to below 1.25%.
• A week ago that Fed meeting split opinion on whether it would move at all. It no longer does: the forecast is a rise to 4.00% from 3.75%, and Tuesday's data did nothing to argue against it — UK sterling's own case weakened as the claimant count came in more than three times the forecast.
• As Asia trades, our strength gauge has the Australian dollar at the bottom of the majors, where it also sat through the session just closed.