A broad risk-off move swept through global markets on Thursday, driven by escalating geopolitical tensions in the Middle East and robust US economic data. The New Zealand Dollar (NZD/USD) fell sharply, trading at 0.588, down nearly 1% and hovering just above its 200-day Simple Moving Average (SMA) of 0.5876. Technical analysts warned that a close below this level could open the door to further declines toward 0.5817 (100-day SMA) and potentially 0.5800, with the January 19 swing low at 0.5737 as a deeper target. The NZD was notably weak against the US Dollar, losing 1.18% this week, though it outperformed the Swiss Franc [1].
The US Dollar strengthened across the board, underpinned by high Treasury yields and solid economic data. The US Dollar Index (DXY) rose over 0.50% to 99.27 [2], with another source citing a move toward 99.30, up 0.45% [3]. US Initial Jobless Claims for the week ending February 28 came in at 213K, below expectations of 215K, and the Challenger, Gray & Christmas report showed announced layoffs fell to 48.3K in February, down 55% from January [2][3]. The ADP Employment Change report indicated 63K private sector jobs added in February, beating expectations of 50K [3]. The ISM Services PMI rose to 56.1, surpassing forecasts [3]. The Federal Reserve's Beige Book described economic expectations as optimistic, with most districts expecting slight to moderate growth [2].
Precious metals suffered as a result of the stronger US Dollar and rising yields. Gold (XAU/USD) tumbled to $5,069, down more than 1.35%, erasing the previous day's gains and hitting a two-day low [2]. Silver (XAG/USD) fell toward $82.20, down 1.18% [3]. Both metals saw negative momentum, with the Relative Strength Index (RSI) turning bearish [2][3]. Despite ongoing Middle East tensions, including Iran's threats and attacks on shipping, safe-haven flows favored the US Dollar over metals [2][3].
US equity markets saw significant declines, with the Dow Jones Industrial Average dropping 840 points (1.73%) to 47,885, the S&P 500 falling 0.82% to around 6,810, and the Nasdaq Composite down 0.50% to 22,690. The Russell 2000 lost 1.65% to 2,590, with small caps hit hardest. Defensive and consumer staple stocks such as Merck (MRK), Johnson & Johnson (JNJ), and Walmart (WMT) fell more than 2% [4]. The selloff was attributed to a missile strike on an oil tanker by Iran, surging oil prices (WTI up 6% above $79, Brent up 3% over $84), and the effective closure of the Strait of Hormuz, which handles about 20% of global oil exports [4].
The spike in oil prices has led traders to scale back expectations for Federal Reserve rate cuts. Markets now price in just one Fed cut this year, with a 96% probability of rates being held steady at 3.50-3.75% at the March 18 meeting, according to the CME FedWatch tool [4]. This is a shift from earlier expectations of multiple cuts, as inflation fears resurface due to higher energy costs. Treasury yields rose further, pressuring equity valuations [4].
Despite the negative backdrop, Broadcom (AVGO) rallied around 6% after reporting first-quarter earnings per share of $2.05 (vs. $2.03 expected) and revenue of $19.31 billion (vs. $19.18 billion estimate), bucking the broader market selloff [4].
Looking ahead, investors are focused on upcoming US Nonfarm Payrolls and Retail Sales data, which could further influence expectations for Fed policy [2][3].
CONCLUSION
Markets reacted negatively to a combination of escalating Middle East tensions and strong US economic data, resulting in a stronger US Dollar, falling precious metals, and a sharp equity selloff. Oil prices surged on supply fears, prompting traders to reduce expectations for Federal Reserve rate cuts. The overall sentiment is risk-off, with investors awaiting further US economic data for direction.