FUNDAMENTAL OVERVIEW USD: The US dollar regained some ground to start the week as the prolonged US-Iran stalemate has taken oil prices back into triple digit levels.
FUNDAMENTAL OVERVIEW USD: The US dollar regained some ground to start the week as the prolonged US-Iran stalemate has taken oil prices back into triple digit levels. That looks unlikely to change anytime soon as Trump has rejected Iran’s proposal to first open the Strait of Hormuz and then hold nuclear talks.
Unfortunately, with US stock prices at all-time highs Trump might not feel any pressure to concede. This might even set the stage for the next US dollar rally if the Strait of Hormuz remains closed for much longer and oil prices stay elevated, thus forcing the Fed to hike interest rates in the coming months. Today, we have the FOMC policy decision and although the Fed is expected to keep everything unchanged amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to resilient US data and a longer than expected US-Iran war.
A neutral Fed shouldn’t bring much volatility, but a more hawkish one could give the greenback a boost. INR: On the INR side, the US-Iran stalemate led to another selloff with the Indian Rupee erasing all the gains since the start of the month and now approaching the record lows. The currency will likely remain under pressure as long as the situation in the Strait of Hormuz remains unresolved.