Geopolitical risks in the Middle East drive USD strength, with traders eyeing Tuesday’s US CPI data for Fed policy clues.
The US Dollar Index (DXY) extended gains for a second day, trading near 101.10 in Asian markets as escalating Middle East tensions boosted safe-haven demand. US strikes against Iranian targets over the weekend, including 140 on Saturday, heightened concerns over regional stability and potential disruptions to global trade routes.
The DXY’s rise follows a three-night campaign by US forces, which targeted over 300 Iranian-linked sites. Conflicting statements from Washington and Tehran over the status of key maritime chokepoints added to market uncertainty. Oil prices climbed on supply fears, raising inflation concerns and expectations of prolonged Federal Reserve tightening.
Traders are now focused on Tuesday’s US Consumer Price Index (CPI) data, with headline inflation expected to dip 0.1% month-over-month in June. Core CPI is projected to rise 0.3%, reinforcing bets on one more Fed rate hike this year. Fed Chair Kevin Warsh’s congressional testimony will also draw attention for policy signals.