Forex News

DBS Group Research expects Indonesia’s March CPI inflation to stay firm at 4% year-on-year, slightly below February’s 4.8%, but with a faster monthly pace. Analysts highlight the impact of higher energy prices and festive demand, as well as base effects. Policy options include holding retail fuel prices via budget savings, though prolonged conflict could force price hikes or subsidy cuts.

CPI seen firm on energy and holidays

"March inflation is expected to remain firm at 4% yoy, compared to 4.8% in the previous month, with a faster month-on-month pace than earlier averages, reflecting the initial impact of elevated energy prices and festival-driven price pressures."

"Base effects will also keep the trend firm."

"The most immediate line of defence would likely be to keep retail fuel prices unchanged, using budgetary savings to offset the higher costs."

"However, if the conflict persists and fuel prices remain elevated into the second quarter, the likelihood of price increases or subsidy reductions will rise."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• Gold rebounds sharply as dip buyers return amid escalating Middle East tensions.
• Rising oil prices and higher inflation expectations reinforce bullion's safe-haven appeal.
• Stronger Dollar and higher yields fail to deter aggressive Gold buyers.

Gold (XAU/USD) price rallies over 3% on Friday as dip buyers emerge, amid the conflict entering its fifth week of hostilities, with no signs of de-escalation, and as inflation pressures rise. At the time of writing, XAU/USD trades at $4,510 after bouncing off daily lows of $4,375.

Heightened geopolitical tensions underpin Gold, Oil and the US Dollar

Market sentiment remains dismal as US equities fall to 7-month lows. The rise in US Treasury bond yields and broad US Dollar strength has not been an excuse for bullion buyers, who are driving prices higher amid growing uncertainty over the Middle East conflict.

The US Dollar Index (DXY), which measures the buck's performance against six peers, is up 0.30% to 100.16, underpinned by the rise in US yields. The US 10-year T-note is up nearly two basis points at 4.428%.

Over the last two days, geopolitical headlines have been driving price action. On Thursday, US President Donald Trump calmed the markets, delaying the pause on attacks on Iranian energy installations until April 6.

Nevertheless, the White House is sending mixed signals as the Wall Street Journal reported that the Pentagon is deploying an additional 10,000 troops to the region.

As a result, investors ignored Trump's attempt to de-escalate the conflict, as evidenced by soaring energy prices, with WTI rallying nearly 5% to $98.33 per barrel.

Recently, Iran's Islamic Revolutionary Guard Corps has said that the Strait of Hormuz is closed.

US economic data

Data-wise, the University of Michigan revealed that American households are turning pessimistic about economic conditions. The Consumer Sentiment in March dipped from 55.5 to 53.3, below forecasts of 54. Inflation expectations for the next twelve months jumped from 3.4% in February to 3.8%, while for the five years remained unchanged at 3.2%.

Money markets now expect the Federal Reserve's (Fed) next move to be a rate hike, given the current scenario of high energy prices. So far, traders have priced in six basis points of tightening towards the year-end, as revealed by Prime Market Terminal.

Fed's Barkin says "prudent to hold rates," Paulson stays neutral

Richmond Fed President Thomas Barkin favors holding rates to await more clarity on the next move. He said the rapid progress in AI has clouded the economic outlook, while adding that, before the Oil shock, inflation had already stalled.

Recently, Philadelphia Fed Anna Paulson showed a neutral stance, saying that the labor market feels "fragile." Paulson added that the Iran war puts pressure on the dual mandate, and that "inflation levels are still too high."

XAU/USD technical outlook: Gold rally capped ahead of the 100-day SMA

Gold price consolidates on Friday, unable to clear key resistance around $4,560, which could open the door to further upside. It should be noted that momentum remains bearish, as indicated by the Relative Strength Index (RSI), but the index broke a previous peak, suggesting sellers are losing steam.

If XAU/USD rises past the Thursday high of $4,544, this could open the path to challenge the 100-day Simple Moving Average (SMA) at $4,605, which is seen as the next area of interest. Up next lies the March 20 daily high at $4,736, followed by $4,800.

On the downside, if Gold closes daily below $4,500, the next support would be the March 24 daily low at $4,306, followed by the March 23 swing low at $4,098.

(This story was corrected on March 27 at 19:05 GMT to remove that US President Donald Trump delayed strikes on Iran energy facilities by an extra day early on Friday.)

Societe Generale’s Kunal Kundu analyses how the Iran conflict exposes India’s macro vulnerabilities through imported energy dependence and trade route risks. Kundu highlights broad spillovers from higher Oil and gas prices into the consumption basket and external balances. He argues for a calibrated fiscal–monetary mix, with the central bank treating inflation as transitory and targeted government support for households.

Imported energy strains and policy response

"Four weeks into the Iran conflict, uncertainty remains the only constant. India is feeling the fallout, exposing macro vulnerabilities in energy security, trade logistics, price stability, and external balances."

"Despite oil intensity of GDP trending lower and a relatively contained oil trade deficit, heavy reliance on imported energy leaves India exposed if disruptions persist."

"The conflict highlights route risk via the Strait of Hormuz and the Red Sea, compounding import and supplier concentration risks."

"Spillovers are broad as oil and gas feed into most of the consumption basket—electricity, plastics, fertilisers, chemicals, and more."

"Appropriate approach: the central bank treats inflation as transitory, ends the easing cycle while maintaining ample liquidity; the government deploys targeted fiscal measures (aided by RBI [Reserve Bank of India] dividend transfer) to limit pass-through and support vulnerable households."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)