USD: Conflict premium supports gains – ING

FXStreet Insights Team FXStreet

ING’s Chris Turner expects the Dollar to stay supported as the Middle East conflict keeps Oil prices elevated and markets await central bank responses. He sees this week’s FOMC meeting as Dollar-positive, with the Federal Reserve likely to push back against current rate-cut pricing. Turner notes DXY is testing the top of its nine‑month range near 100.35/40.

Dollar holds firm on conflict risk

"It looks like the market wants to hear news on a path to a ceasefire before removing the risk premium buoying energy and the dollar."

"But until there is some news of a negotiated settlement, the market this week will be focusing on the central bank response. Eight of the G10 central banks meet to set monetary policy this week."

"Regarding this week's FOMC meeting, we think the event risk is dollar positive. At the January FOMC meeting, the takeaway was that the Federal Reserve wanted to see clear signs of lower inflation before delivering further rate cuts."

"Events in the Middle East warn that US inflation will be heading to 3.5% and not 2.0% this summer. The FOMC will likely further question market pricing of another Fed rate cut this year, where around 23bp is still priced in by year-end."

"DXY is now at the top of the nine-month trading range at 100.35/40. A calmer equity environment this Monday morning suggests DXY may not be ready to break higher just yet."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD drops toward 0.6900 amid USD uptick, ahead of US NFP

AUD/USD meets fresh supply and drifts toward 0.6900 in the Asian session on Friday, near its lowest level since early July. The US Dollar regains traction near 17-month highs as oil-driven inflationary concerns counter reduced bets on an October Fed rate hike and the overnight pullback in US bond yields, weighing on the pair. Focus is now on the US jobs data.

USD/JPY holds steady near 158.00 after hot Tokyo CPI; US NFP awaited

USD/JPY consolidates near 158.00, the top end of its weekly range in the Asian session on Friday, moving little after hotter-than-expected Tokyo CPI, which backs the case for more BoJ rate hikes. Meanwhile, the US Dollar retains a bullish undertone near a one-and-a-half-year top amid oil-driven inflation fears and geopolitical uncertainties, supporting the pair ahead of US Nonfarm Payrolls.

Gold returns to the red and tests $4,150, with eyes on US NFP

Gold edges lower in a multi-day-old range near $4,150 in the Asian session on Friday as traders await the US NFP report for more cues about the Fed's policy path. The outlook will drive the US Dollar and the non-yielding bullion. Meanwhile, oil-driven inflation fears offset the overnight pullback in US bond yields, helping the USD to stand firm near a one-and-a-half-year high amid the US-Iran standoff.

WTI holds steady near $92.00 as US weighs sending more troops to Middle East

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $91.75 during the early Asian trading hours on Friday. WTI flatlines after a two-day gain as the United States (US) mulled sending another aircraft carrier group to the Middle East.

Why speculators slashed Yen longs by the most since August — and what that signals about risk

For much of the past month, the Japanese Yen (JPY) had become one of the market's preferred defensive trades. Hedge funds accumulated more than 170K net long contracts over four weeks as investors positioned for tighter Bank of Japan (BoJ) policy, persistent geopolitical uncertainty and a more cautious outlook for global growth.

Markets are pricing a Fed pause. The jobs data says the hike is still coming

The market has rapidly changed its mind about the Federal Reserve (Fed). Only a week ago, investors saw an October interest-rate hike as the most likely outcome. However, softer inflation and cautious comments from policymakers have since turned a pause into the dominant scenario. Yet beneath that dramatic repricing, the US economy is sending a considerably less dovish message.