[MARKET ANALYSIS] DXY flat into CPI, AUD outperforms as more banks forecast a hike next week

DXY is choppy this morning; currently trading around the unchanged mark, within a narrow 96.69-99.07 range. Little fresh from a European perspective, as focus remains on newsflow out of Iran. As it stands, the current conflict is showing few signs of ending, with reports now suggesting that Iran is taking steps to lay mines in the Strait of Hormuz. On the energy front, the IEA Governing Board is meeting today, whilst a separate G7 discussion on energy coordination is also scheduled for 14:00 GMT today. It was recently reported that the IEA proposed a 300-400mln barrel release of stockpiles – sources suggest that, should there be no objections, it could be announced as soon as later today. In theory, a release in stockpiles may provide some short-term relief to net-importers, hence weighing on the Dollar. Though on a medium/long-term horizon, traders may look for concrete progress on ending the war in Iran, or at least, see ships sail through the Strait of Hormuz.
US CPI data for February is due, but may lack any signalling capacity into the future course of monetary policy, given it reflects prices prior to the Middle East conflict. Fed’s Bowman (voter, dove) is due to speak on supervision and regulation, but given the Fed is in blackout, will not comment on monpol.
The Aussie extends on recent outperformance, as more banks now expect the RBA to hike rates at next week’s meeting. NAB and Westpac are the latest banks seen supporting a hike, joining the likes of Goldman Sachs and Bank of America. Delving into Westpac briefly, the bank previously forecast a hike in May, but the analysts now believe that the RBA will be “compelled to react” to the recent strength in oil prices. AUD/USD currently trades towards the upper end of a 0.71154 to 0.7185 range.
Other G10s are trading modestly on either side of the unchanged mark vs the USD. The Loonie posts mild gains, given today’s strength in oil prices, whilst the JPY is the slight laggard, joined by the EUR. USD/JPY is venturing back into the touted “intervention zone”, beyond the 158.00 mark - though desks question the efficacy of intervening as the Iran war continues. GBP is essentially flat, awaiting cues from the Treasury Committee, which will question the Chancellor Reeves on the Spring Statement. BoE’s Breeden is also set to speak.
For the EUR, currently trades just above the 1.1600 mark, within a 1.15904-1.1645 range. Today, there was a slew of ECB speakers, with particular focus on Kazimir who suggested that a rate hike on Iran may be closer than thought. This spurred some very modest upside in the EUR at the time, but was ultimately short-lived, given that he stated there is no reason to move rates at the next meeting.