Dollar Held, Trump Yet to Approve 60-Day MoU
The dollar index held steady around $99 on Friday (May 29th) after weakening in the previous session, following reports that the US and Iran had reached an interim peace deal that eased inflation concerns and the potential for further interest rate hikes. Markets viewed the possibility of de-escalation as potentially reducing the energy risk premium that had previously supported the dollar.
According to reports, Washington and Tehran are said to be extending the ceasefire for 60 days and beginning negotiations on Iran's nuclear program, while considering easing shipping flows through the Strait of Hormuz. However, the deal is said to still await President Donald Trump's final approval, so market reaction remains measured and vulnerable to a reversal if political obstacles arise.
The dollar also came under pressure from softer-than-expected US PCE inflation data, helping to ease concerns that the latest energy shock would significantly worsen the inflation outlook. However, investors still see the Fed as likely to keep interest rates unchanged well into next year, keeping the dollar resilient, though not aggressively strengthening.
Going forward, the dollar's direction will depend heavily on two factors: the certainty of the finalization of the US-Iran deal (and its impact on energy prices), and the consistency of US inflation data, which will determine whether the "higher for longer" narrative persists or begins to soften. (Arl)
Source: Newsmaker.id
