The US Dollar Index (DXY) fell towards 98.10 and hit multi-week lows, as softer inflation data and improved global sentiment led to broad US dollar selling. Lower oil prices and easing yields added pressure, while talk of possible US–Iran negotiations reduced demand for safe-haven assets.
US data were mixed but leaned negative for the dollar, as March Producer Price Index (PPI) stayed at 3.8% year on year. The 4-week average of ADP Employment Change rose to about 39K from 26K, pointing to a steady jobs trend.
EUR/USD rose above 1.1790 and GBP/USD moved up towards 1.3570, supported by US dollar weakness. USD/JPY fell towards 158.80 as the yen firmed and markets weighed the chance of a higher Bank of Japan inflation view.
AUD/USD climbed towards 0.7130 as risk appetite improved. WTI oil dropped below $91.65 per barrel, while gold held near $4,836 with limited upside.
Upcoming events include US IMF meetings (April 15–17), France March CPI, Eurozone February industrial production, the NY Empire State index, and the Fed Beige Book. Later releases include Australia jobs data, China Q1 GDP, UK February GDP and output data, Italy and Eurozone March inflation measures, ECB accounts, and US jobless claims and manufacturing surveys.
Looking back to this time in 2025, we saw a market driven by hopes of de-escalation between the US and Iran. That optimism has since faded, reminding us that geopolitical risk premiums can return quickly to the market. This shift suggests caution against shorting the US Dollar based on temporary news events.
Last year, the market priced in a less aggressive Federal Reserve based on the steady Producer Price Index data. However, US Core CPI has remained stubbornly above 3.5% through late 2025 and into this year, forcing the Fed to maintain its restrictive stance. This has supported the US Dollar Index, which recovered from its 98.10 lows and has been trading in a higher range, recently touching 104.50 in March 2026.
The sharp drop in WTI oil below $92 in April 2025 proved to be a prime buying opportunity as negotiation hopes stalled. With WTI trading consistently above $95 per barrel this quarter, call options or call spreads on oil could be attractive. We should watch the upcoming EIA inventory data, as another surprise drawdown like the one we saw two weeks ago could push prices higher.
Last year’s sharp fall in USD/JPY to the 158.80 region was driven by expectations of a dovish Fed and a hawkish Bank of Japan. Since then, the Fed’s restrictive policy has outpaced the BoJ’s slow normalization, creating a wide interest rate differential in favor of the dollar. This suggests that buying dips in USD/JPY remains a viable strategy, targeting a move back toward its multi-decade highs.
The EUR/USD rally above 1.1790 we saw was primarily a story of temporary US Dollar weakness. Since then, the narrative has shifted back to concerns over Eurozone growth, with February’s industrial production figures showing a surprising 0.5% contraction. Traders should therefore consider fading rallies in the pair, possibly using put options to hedge against a decline.
