Geopolitical risks in the Middle East drive caution, lifting the USD Index after a sharp drop below 99.50 amid Fed rate cut bets.
The US Dollar Index recovered to around 99.70 in early European trading Tuesday, paring earlier losses as Middle East tensions flared. The index had slumped below 99.50, its lowest since early June, after weak US data reduced expectations for a Federal Reserve rate hike in September.
Investors monitored fresh geopolitical risks after a vessel was struck in the Strait of Hormuz and US President Donald Trump issued threats amid stalled Iran negotiations. Oil prices surged over 3% Monday, adding to market unease.
Housing data, industrial production, and trade price indexes for July are due later Tuesday, though focus remains on geopolitical developments.