Dollar Strengthens, Markets Concerned About US-Iran Ceasefire
The dollar index rose again above 98 on Tuesday (May 12), after US President Donald Trump cast doubt on the sustainability of the US-Iran ceasefire. Trump's rejection of Tehran's latest peace offer boosted demand for safe-haven assets, leading to increased demand for the dollar amid growing geopolitical uncertainty.
Several reports also indicated that Trump would meet with his national security team to discuss further options in the conflict, including the possible resumption of military operations. Meanwhile, the White House is reviewing plans to escort commercial vessels through the Strait of Hormuz, a strategic waterway that has attracted market attention due to its impact on global energy supplies.
The ongoing conflict has kept oil prices high, making inflation risks prominent. Rising energy costs are expected to prolong price pressures across various sectors, reinforcing the view that interest rates may need to remain higher for longer to curb inflation.
Market participants are now awaiting the release of US consumer inflation (CPI) data for April to assess how much the Iran war has impacted the economy and how it might shape the Federal Reserve's policy direction. This data is crucial because it will influence market expectations regarding the timing and scope of future interest rate adjustments.
In addition to geopolitical and inflationary factors, investors are also focused on the US diplomatic agenda. Trump is scheduled to meet with Chinese President Xi Jinping this week, with trade relations and artificial intelligence (AI) expected to be key topics that could influence global market sentiment, including the direction of the dollar. (asd)
Source: Newsmaker.id
