Improving market mood weakened the US Dollar as oil prices steadied and risk appetite picked up. The EIA Short-Term Energy Outlook said that once oil trade through the Strait of Hormuz resumes, global production will keep exceeding consumption, easing stagnation fears. G7 members said they are ready to release reserves to limit oil prices, but no release has taken place. President Donald Trump said the war launched with Israel against Iran was “largely complete”, while German Chancellor Friedrich Merz said there was concern about the lack of a joint plan to end the war.

Dollar Index And Major Pairs

The US Dollar Index traded near 98.70 and slipped in a tight range. EUR/USD traded near 1.1640, a one-week high after three days of gains. GBP/USD traded near 1.3455, a two-week high, as markets reduced expectations of a Bank of England rate cut at the 19 March meeting. USD/JPY traded near 157.70; the yen held back as oil supply risks weighed on an energy-importing Japan. WTI traded below $80 per barrel after US War Secretary Pete Hegseth warned Iran over any move to block Hormuz. Gold traded at $5,230 after moving above a one-week high. Data due: 11 March Germany HICP; UK BoE hearings and inflation expectations; US CPI. 12 March Australia inflation expectations; UK industrial production; US permits, starts, jobless claims, budget; NZ PMI; 13 March UK GDP and manufacturing; Spain and eurozone data; Canada jobs and wages; a broad set of US activity, inflation, confidence, and labour releases.

Strategy Takeaways From March 2025

Looking back at the situation in March 2025, the market’s optimism hinged entirely on the war ending and the Strait of Hormuz reopening. We should consider buying put options on WTI crude oil, as the EIA’s forecast from that time predicted a supply glut once the strait was cleared. This mirrors the pattern we saw in 2022, when oil prices fell significantly after the initial shock of the Ukraine conflict subsided. However, the German Chancellor’s skepticism last year was a clear warning that peace was not guaranteed. To hedge against a sudden breakdown in talks, we believe purchasing cheap, out-of-the-money call options on crude is a sensible strategy. With WTI currently trading near $85 a barrel today, we know how sensitive prices are to any hint of supply disruption in the Middle East. Last year’s conflict caused markets to abandon bets on a Bank of England rate cut, strengthening the pound. We feel that buying call options on GBP/USD could be beneficial, as persistent inflation will likely keep the BoE’s stance hawkish for longer than anticipated. Recent UK inflation data from January 2026 showed CPI still running at 2.8%, well above the bank’s target, reinforcing this view. The broader risk-on sentiment from last year is putting pressure on the US Dollar, creating an opportunity in EUR/USD. Given the move to a one-week high, we should look at call spreads to profit from a continued rise while limiting upfront cost. This is a tactical play on the idea that improving global stability will continue to weigh on the dollar’s safe-haven status. Gold at $5,230 an ounce last year had an enormous geopolitical risk premium baked into its price. If a durable ceasefire holds, we expect this premium to evaporate, leading to a sharp correction for the metal. Buying puts on gold futures is the most direct way to position for this, especially as gold trades much lower today, near $2,450 in March 2026. The upcoming inflation reports from last year’s docket, particularly the US CPI and PCE data, were critical checkpoints. We must remember that any signs of persistent inflation could have quickly reversed the dollar’s weakness and forced a rapid unwinding of these risk-on positions. This data will be the key to confirming if the market’s optimistic sentiment is truly justified. Create your live VT Markets account and start trading now.

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