The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of six major currencies, has snapped its losing streak that began on April 6. It is currently trading near 98.20 during Thursday’s European session.
The US Dollar is finding modest support as traders remain cautious about the ongoing situation in the Strait of Hormuz. The region continues to face uncertainty, with shipping routes effectively constrained under a dual blockade. However, Iran may permit limited vessel movement through the Omani side if an agreement is reached to avoid further escalation.
Despite this support, the Greenback could face renewed pressure as safe-haven demand weakens amid rising hopes of easing tensions in the Middle East. US President Donald Trump recently indicated that the conflict is “close to over.” Reports have also suggested a potential extension of the ceasefire by two weeks, although Trump signaled that ongoing negotiations may make such measures unnecessary.
At the same time, declining energy prices have helped ease inflation concerns, reducing expectations of further tightening by the Federal Reserve. Markets widely anticipate that the Fed will keep interest rates unchanged this month and possibly for the rest of the year.
Cleveland Fed President Beth Hammack stated in a CNBC interview that the key factor to monitor is the duration and extent of elevated energy prices. Meanwhile, St. Louis Fed President Alberto Musalem noted that the recent oil shock linked to Middle East tensions is contributing to core inflation, which is expected to remain close to 3% throughout the year.
