- US Dollar Index declines on improved sentiment amid expectations of Middle East de-escalation.
- A Bloomberg report highlighted speculation about a possible two-week extension of a ceasefire between the US and Iran.
- Easing energy prices reduced inflation concerns and lowered expectations of further Federal Reserve tightening.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is continuing its losing that began on April 6 and trading around 97.90 during the Asian hours on Thursday.
The US Dollar remains under pressure amid improved market sentiment, supported by expectations of a potential de-escalation in the Middle East conflict. US President Donald Trump stated that the war was “close to over.” A Bloomberg report highlighted speculation about a possible two-week extension of a ceasefire, although Trump downplayed the need for such a measure, pointing to ongoing negotiations aimed at ending the conflict.
The Strait of Hormuz remains effectively closed under a dual blockade. However, Tehran may allow vessels to pass freely through the Omani side of the Strait if an agreement is reached to avoid a renewed escalation in hostilities.
The Greenback faced further downside pressure from easing energy prices, which helped alleviate inflation concerns and reduced expectations of additional Federal Reserve (Fed) tightening. The Fed is broadly expected to keep interest rates unchanged this month and potentially through the remainder of the year.
Beth Hammack stated in a CNBC interview on Wednesday that the key factor to monitor is how high energy prices rise, and more importantly, how long they remain elevated. Meanwhile, Alberto Musalem said that the oil shock triggered by the Middle East conflict is likely feeding into core inflation, with expectations that it will remain near 3% throughout the year.
