Forex Today: US Dollar surge takes a breather before important US economic releases

Market Highlights for Wednesday, March 4

As Wednesday unfolds, the US Dollar pauses after two days of strong gains, entering a period of consolidation. Today’s US economic agenda includes the release of ADP Employment Change figures for February, alongside the Institute for Supply Management’s (ISM) Services PMI report for the same month.

Tensions in the Middle East remain high, with the US and Israel continuing to target sites in Iran and Lebanon. Oil prices are climbing further after a surge of over 5% on Tuesday, fueled by mixed news about the Strait of Hormuz. President Donald Trump announced that the US Navy will provide insurance and, if necessary, military escorts for ships navigating the Gulf, following Iran’s efforts to restrict passage through the strait. Meanwhile, Iran’s Revolutionary Guards asserted on Wednesday that they still maintain control over the area. West Texas Intermediate (WTI) crude is trading above $76.50, up more than 2% for the day.

The USD Index has eased slightly, hovering near 99.00 in early European trading, after a robust 1.5% rally at the start of the week. US stock index futures are also under pressure, down between 0.3% and 0.4%, following significant losses on Wall Street the previous day.

USD/JPY is retreating below 157.50 after two days of advances. Japan’s Finance Minister Satsuki Katayama stated that authorities are closely monitoring market activity and are ready to intervene if needed. Bank of Japan Governor Kazuo Ueda warned that escalating conflict in the Middle East could significantly affect both the global and Japanese economies through shifts in energy prices, noting that higher oil costs would negatively impact Japan’s trade balance and economic growth.

Gold struggled amid risk-off sentiment, dropping over 4% on Tuesday. However, XAU/USD is rebounding this morning, up more than 1% and trading near $5,170.

Weighed down by the ongoing strength of the US Dollar, EUR/USD extended its decline, reaching its lowest point since late November below 1.1550 on Tuesday. The pair has since recovered, holding above 1.1600 in early European trading.

Earlier today, Australia reported that its Gross Domestic Product (GDP) grew at an annualized rate of 2.6% in the fourth quarter, surpassing both the previous quarter’s 2.1% and market expectations of 2.2%. After a 0.8% drop on Tuesday, AUD/USD is steady above 0.7000.

GBP/USD is stabilizing around 1.3350 after two consecutive days of losses.