ING’s Chris Turner highlights that ongoing geopolitical risks in the Middle East and elevated energy prices are supporting the US Dollar Index (DXY), with expectations that DXY could drift towards the upper end of its recent trading range. Turner specifically notes that if European natural gas prices continue to rise, DXY may edge back towards the 99.40/50 area [1].
The recent release of the Fed's Beige Book ahead of the 18 March FOMC meeting provided a mixed and subdued picture of US growth and the labor market. There are indications that companies may be preparing to pass on tariff costs to consumers, but there are doubts about whether lower-income consumers can absorb these increases [1].
Additionally, Turner points to increasing headlines about the US private credit space, particularly regarding redemptions from business development companies (BDCs) such as Blue Owl and Blackstone. These BDCs, which target wealthy retail investors and invest in SMEs, are experiencing heavy redemptions amid concerns that their funds have been used to finance the AI boom for software companies. The market is now focused on the potential size of further redemptions, the possibility of BDCs being 'gated' (halting redemptions), and whether BDCs may need to sell illiquid investments to meet redemption demands [1].
CONCLUSION
Persistent geopolitical risks and elevated energy prices are keeping the US Dollar supported, with ING expecting DXY to move towards the upper end of its recent range. The market is also closely watching developments in the US private credit space, particularly BDC redemptions, which could impact liquidity and investor sentiment.