Renewed optimism over a US-Iran agreement weighs on the USD, reversing gains driven by Middle East tensions and inflation concerns.
The US Dollar Index (DXY) trades near 99.00, remaining flat as optimism over a potential US-Iran deal reduces demand for safe-haven assets. The index retreated from a seven-week high of 99.10 after reports of a 60-day Memorandum of Understanding, pending US approval.
Prior to this, the DXY had strengthened amid Middle East conflict, which lifted energy prices and stoked inflation fears. Traders had priced out rate cuts, with the CME FedWatch tool now showing a 52.9% chance of steady rates by year-end, a shift from earlier expectations of two cuts.
Investors are now eyeing upcoming US ISM PMI and Nonfarm Payrolls data for further direction. The DXY has traded in a tight range between 98.84 and 99.54 over the past two weeks.