The U.S. dollar retreated on Tuesday as global markets responded positively to a ceasefire agreement between Israel and Iran, fueling a broad risk-on rally. The Dollar Index slipped 0.3% to 97.752 as of 08:00 GMT, though it remains up for the week.
Former U.S. President Donald Trump confirmed the ceasefire, calming geopolitical tensions that had recently supported the greenback and driven oil prices higher. The resulting drop in crude oil prices contributed to the dollar’s pullback, while lifting risk-sensitive currencies.
Analysts at ING noted that “moderate” dollar strength built on geopolitical fears had “faltered” following the oil price correction. Markets now shift focus to Fed Chair Jerome Powell’s testimony before Congress, where political pressure from Trump to cut rates by “two to three points” may raise concerns about central bank independence.
Sterling and Euro Advance
- GBP/USD surged 0.7% to 1.3596, with sterling buoyed by rising domestic grocery inflation. Data from Kantar showed food prices rose 4.7% in the four weeks to June 15—the highest since March 2024—driven by increases in essentials like butter, chocolate, and meat. This may complicate the Bank of England’s path to rate cuts.
- EUR/USD edged up 0.1% to 1.1591, helped by cheaper energy prices and improved German business sentiment. The Ifo business climate index rose to 88.4 in June, beating forecasts, with firms growing more optimistic about future conditions.
Yen Recovers, Yuan Holds Steady
- USD/JPY fell 0.8% to 144.97 as the yen rebounded from prior losses. Traders now await Tokyo inflation data for insights into the Bank of Japan’s monetary stance.
- USD/CNY dipped slightly to 7.1780 after China’s central bank left its key lending rate unchanged, signaling continued caution amid soft economic data.
Leave a Reply