[MARKET ANALYSIS] DXY bid on haven flows, EUR eyes the G7 ministers meeting on energy for reprieve

DXY is stronger this morning and trades at the upper end of a 98.83 to 99.69 range, with the index buoyed by the ongoing Iran war. In brief, there are currently no signs of a near-term resolution of the war, with oil prices surging some 30% at one point. (See the Newsquawk analysis piece at 08:25 GMT for details)
Further upside for the index could bring into play a cluster of highs from late November 2025, and the key 100.00 mark on the 25th of November 2025; the high that day was 100.26. But, upside may be limited in the near-term as markets count down to the G7 ministers meeting at 08:30 GMT / 12:30 EDT. A source cited by the FT suggested a joint release in the range of 300-400mln barrels, 25-30% of the IEA's reserves, would be appropriate. For reference, the Ukraine-Russia war led to the IEA releasing some 182mln barrels in March and April 2022. Therefore, a release of 300-400mln barrels could spur some short-term pressure in the USD.
EUR and GBP both continue to extend losses, as the net-importers of oil face significantly higher energy prices, stoking inflationary fears. As such, money markets now fully price in two ECB hikes in 2026 (vs none pre-war); markets now assign a 50% chance of a hike at the BoE (vs three cuts in 2026 pre-war). Elsewhere on a domestic footing, focus has been on the Baden-Württemberg election in Germany. The Greens won the election, whilst the CDU (29.7%) extended on its standing from the last election; importantly, the SPD fell to 5.6% (prev. 11%), which may stoke fears for Chancellor Merz, and the standing coalition. Next up, Rhineland-Palatinate votes on the 22nd of March; a defeat there would raise questions on regional political stability for Merz.
Havens (CHF & JPY) also extend losses, given both are net-importers of energy. For the CHF specifically, Switzerland has voted to introduce individual taxation; the government believes that the reform could bring back around 60k people to the labour force, and boost GDP by around 1%. As for Japan, USD/JPY continues to advance into “intervention territory”, which has been seen around 158-160. However, it can be argued that any attempt to intervene may prove to be inconsequential, as recent strength in oil prices show little sign of abating.