USD: Softer tone as conflict risk eases – MUFG

FXStreet Insights Team FXStreet

MUFG’s Senior Currency Analyst Lee Hardman notes the US Dollar (USD) has retreated, with the US Dollar Index (DXY) back towards 98.000, as markets anticipate further de-escalation in the Middle East conflict. He highlights that optimism over a potential deal and normalization of traffic through the Strait of Hormuz is capping Dollar upside, even though a confirmed peace agreement may not trigger another sharp USD sell-off.

De-escalation hopes cap Dollar upside

"The US dollar has quickly given up gains recorded at the start of this week with the dollar index falling back towards the 98.000-level."

"Despite the setbacks over the weekend including Iran firing on vessels in the Strait of Hormuz and the US taking over an Iranian ship, market participants remain optimistic that the Middle East conflict will continue to deescalate providing a headwind for US dollar performance."

"Despite the divide, Bloomberg has reported that there’s still a good chance of a deal in the next few days that effectively ends the war, even if more negotiations are needed over nuclear and military issues according to officials."

"With the US dollar already trading back close to levels prior to the Middle East conflict from late February, the announcement of a deal may not trigger another sharp sell-off for the US dollar."

"Market participants will also be watching closely to see how quickly traffic then normalizes through the Strait to ease global energy supply restrictions."

(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.

GBP/USD clings to recovery gains near 1.3550 after UK CPI data

GBP/USD holds recovery near 1.3550 in European trading hours on Wednesday. The UK annual Consumer Price Index (CPI) inflation picked up to 2.9% in July, meeting estimates, while core CPI rose by 2.6% YoY in July versus 2.5% expected. Mixed UK inflation data failed to provide any impetus to the British Pound.

EUR/USD advances to 1.1600 as USD slips ahead of Fed Minutes

EUR/USD stretches higher toward 1.1600 in Wednesday's European session. The US Dollar resumes its downside as weak US economic data weigh on expectations of tighter Federal Reserve policy. Traders will take further cues from ECB President Christine Lagarde’s speech and the FOMC Minutes later in the day.

Gold surrenders modest intraday gains; trades below $4,450 as FOMC Minutes loom

Gold surrenders modest intraday gains and trades near the lower end of its daily range, below $4,450 heading into the European session. Despite renewed US Dollar selling, bulls seem hesitant and await more cues on the US Federal Reserve's future policy path before placing fresh directional bets on the non-yielding yellow metal.

Shiba Inu's recovery hinges on key support

Shiba Inu recovers slightly, trading at $0.0000044, after finding support around the critical level earlier this week. The dog-themed meme coin shows improving sentiment as social dominance rises, funding rates turn positive, and bullish traders increase their long positions. On the technical side, SHIB suggests a potential recovery if it holds above the key $0.0000043 level.

Inflation prints and FOMC Minutes take centre stage

In the US, the minutes from the FOMC's July meeting are released this evening. Markets are looking for a more detailed sense of the committee's thinking beyond Kevin Warsh's limited forward guidance. Three participants voted in favour of a hike, and since then, several others have flagged willingness to support a hike if warranted by incoming data.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.