Analysis: Safe-haven US dollar makes a strong comeback, and energy inflation expectations reshape policy pricing

Deep Tide TechFlow News, March 3rd, according to Jin10 Data, driven by inflation concerns and safe-haven demand triggered by the escalating Iran conflict, the US dollar experienced its largest two-day consecutive increase in nearly a year. As traders lowered expectations for interest rate cuts, the 10-year US Treasury yield rose by 7 basis points, reaching a three-week high. The expansion of Middle East conflicts pushed up energy prices, supporting the US dollar amid spiraling inflation expectations. Crude oil prices surged above $85 per barrel for the first time since July 2024, while European natural gas prices soared over 40%, hitting the highest level since 2023. Against this backdrop, traders are reducing their expectations for the Federal Reserve’s easing policies by the end of the year. The currency market is currently pricing in a 37 basis point cut by the Fed this year, significantly lower than the 60 basis points expected last Friday. The risk reversal indicator, which signals market positioning, shows that short-term bullish sentiment on the dollar has reached its highest point since June last year. An anonymous knowledgeable trader revealed that institutional accounts have driven a large portion of spot flow, reducing recent long positions in euros and pounds.