USD hovers near 10-month highs

Today’s headlines

What’s happening: The US dollar edged lower this morning but remained near 10-month highs.

What happened: The US is looking to announce a coalition of nations to escort tankers through the Strait of Hormuz, amid the tensions with Iran.

Prospects of talks between US and Iran also lowered demand for safe-haven assets.

Why it matters: The US-Iran war entered the third week, raising energy concerns after Iran’s new Supreme Leader said last week that the Strait of Hormuz will remain effectively closed.

Oil prices stabilised this morning despite the US announcing attacks on military targets at Iran’s key oil-export hub of Kharg Island over the weekend. Washington also warned to strike energy infrastructure in case Iran interferes with the Strait of Hormuz.

Data released last week showed that US initial jobless claims declined by 1,000 from the previous week to 213,000 in the latest week, compared to market estimates of 215,000. US inflation rate held steady at 2.4% in February, in-line with markets expectations. The core PCE price index, the Fed’s preferred inflation gauge, rose by 0.4% in January, maintaining the pace of the previous month. The US economy grew by an annualised 0.7% in the fourth quarter, recording the weakest performance since the first quarter of 2025.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.1% to 100.25 this morning. However, the index remained close to its highest in 10 months as higher energy costs raised inflation concerns and lowered speculations of the Federal Reserve cutting interest rates anytime soon.

What to watch: Investors will keep an eye on the ongoing US-Iran war. Markets will also focus on comments from central banks, with the European Central Bank, Reserve Bank of Australia, Bank of Japan and Bank of England scheduled to hold their monetary policy meetings this week – their first since the start of the Middle East conflict.

Data on NY Empire State manufacturing index (1630 UAE Time), industrial production (1715 UAE Time) and NAHB housing market index (1800 UAE Time) will be released today. The NY Empire state manufacturing index, which declined to 7.1 in February from 7.7 in the previous month, is expected to fall further to 3.8 in March. Analysts expect industrial production to rise 0.2% in February following 0.7% in January, while the NAHB/Wells Fargo housing market index is expected to rise to 37 in March from 36 in the previous month.

The markets today

China’s stock markets in focus today amid continued Middle East tensions

Context: The CSI 300 index traded lower this morning as investors assessed the latest economic reports.

Details: Data released this morning showed that China’s retail sales surged 2.8% year-over-year during the first two months of 2026. This marked a significant acceleration from December’s 0.9% growth and topping market estimates of 2.5%. The recent surge in retail trade was the strongest since October 2025, amid strong holiday spending.

China’s surveyed urban unemployment rate climbed to 5.3% in February from 5.2% in January. The figure also topped market expectations of 5.1%. Industrial production jumped 6.3% year-over-year during the combined January-February period, up from 5.2% in December and higher than market estimates of 5.1%.

China’s new home prices fell 3.2% year-over-year in February compared to a 3.1% decline in the previous month. This marked the 32nd straight month of contraction.

China’s fixed-asset investment rose by 1.8% in the January-February period, versus market estimates of a 0.4% decline.

The CSI 300 Index fell 0.77% to trade at 4,633.10, while the Shanghai Composite index dipped 0.96% to 4,056.17 this morning. The USD/CNY forex pair edged higher to 6.8991.

What to watch: Amid a lack of economic data releases, investors will continue monitoring the ongoing Middle East conflict, which is expected to impact Chinese equity markets ahead.

Other Markets: European indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.43%, 0.60%, 0.91% and 0.50%, respectively.

The news shaping the markets

The European Union announced plans to renew sanctions against individuals and entities lending support to Russia’s war in Ukraine. The news sent the USD/RUB pair higher in forex trading this morning.

New Zealand’s electronic card transactions surged 1.4% in February following a 1.1% decline in the previous month, which lent support to the NZD/USD forex pair.

Saudi Arabia’s annual inflation rate eased to 1.7% in February from the previous month’s 1.8%. Inflation falling to the lowest level since September 2024 sent the USD/SAR pair lower in forex trading this morning.

Colombia’s consumer confidence rose to 18.3% in February from 18.2% in the previous month, exerting pressure on the USD/COP forex pair.

Germany’s current account surplus rose to €17.1 billion in January from €16.6 billion in the year-ago period, which sent the EUR/USD pair higher in forex trading this morning.

What else to watch today

Turkey’s budget balance (1200 UAE Time), India’s unemployment rate (1430 UAE Time), Brazil’s IBC-BR economic activity (1600 UAE Time), Canada’s housing starts (1615 UAE Time), inflation rate (1630 UAE Time) and new motor vehicle sales (1630 UAE Time) as well as US capacity utilisation (1715 UAE Time), manufacturing production (1715 UAE Time) and NY Fed bill purchases 4 to 12 months (1720 UAE Time).