Dollar Rallies on Fresh Safe-Haven Demand
DXY Pushing Higher
The US Dollar remains firmer on Thursday as the DXY continues to recover off last week’s lows. Ongoing uncertainty around the health of the US/Iran ceasefire has seen oil prices pushing higher in recent days, stunting the rally we’d seen in stocks and driving fresh safe-haven demand for crude. Despite Trump extending the ceasefire beyond Tuesday’s deadline, markets have not cheered the move with scepticism creeping in and fears over fresh tensions in the Strait of Hormuz. The IUS seized an Iranian ship at the start of the week followed by reports that Iran was targeting foreign ships in the Strait again, declaring the Strait closed in response to the ongoing US blockade. With the US and Iran now at a stalemate over the Strait of Hormuz, it’s unclear how a path to a proper peace deal can be agreed without either side conceding control near-term.
Hawkish Fed Outlook
With energy prices remaining elevated amidst ongoing supply disruption in the Middle Eat and residual risks of the ceasefire breaking down, the US rates outlook remains skewed higher. Traders now widely expect the Fed to hold off from rate cuts this year with USD likely to stay anchored higher while inflation remains elevated. Only a near-term end to the war and proper peace deal is likely to affect this dynamic. Indeed, if peace talks break down entirely and the US resumes military action against Iran, this could see USD sharply higher amidst a spike in safe haven inflows as crude surges and risk markets tank.
Technical Views
DXY
For now, DXY is pushing firmly back above the 98.24 level with price fast approaching a fresh test of the 99.15 level. This is a key marker for the index and a break higher here will be firmly bullish turning focus back to the key $100 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.