Dollar Held, Yen and Gold Also Affected by Middle East Headlines
The US Dollar Index (DXY) weakened around $98 on Thursday (May 7) as markets continued to reassess the direction of risk sentiment amid rapidly changing headlines regarding a possible US-Iran deal, including the reopening of the Strait of Hormuz.
Initial optimism, which had dampened safe-haven demand, waned when further reports indicated a number of key points remained deadlocked, particularly regarding maritime access, sanctions relief, and the security framework. This uncertainty has returned to a more two-way movement in the FX market: risk-on sentiment drives the dollar lower, while any sign of a breakdown in negotiations tends to revive defensive support for the greenback.
In major markets, EUR/USD hovered around 1.1750. GBP/USD hovered around 1.3577. Meanwhile, USD/JPY hovered around 156.66, with market attention still sensitive to US yield dynamics and geopolitical uncertainty. Among commodity currencies, AUD/USD traded around 0.7222.
Commodity-wise, oil remains volatile as negotiation headlines rapidly change. WTI is hovering around US$96.3 per barrel, while Brent is hovering around US$101.4 per barrel. This movement reflects the tug-of-war between hopes for de-escalation (which typically lowers the supply risk premium) and the risks of logistical/security disruptions that have not yet fully subsided.
Gold is trading on a weaker note as safe-haven demand wanes, with XAU/USD trading around US$4,709.92. Easing tensions typically pressure hedge funds, while a resurgence of geopolitical uncertainty and energy volatility could bolster defensive demand.
The market is also closely monitoring signals of US labor market resilience ahead of the payrolls release, after the latest jobless claims (as per the material) showed an increase in initial claims but a decrease in continuing claims—a combination that could keep policy expectations sensitive to the data and impact the dollar via interest rate expectations and yield movements.
Going forward, market focus is likely to be on three variables: developments in US-Iran negotiations and the security status of the Strait of Hormuz, the direction of oil as a proxy for geopolitical risk premiums, and the release of US employment data, which could alter the pricing of policy expectations and reflect volatility on the DXY and major pairs. (Arl)*
Source: Newsmaker.id
