Dollar Slides As Iran War Optimism Grows
DXY Down on Tuesday
The US Dollar is pushing heavily lower on Tuesday as rising optimism around an end to the Iran war fuels reduced safe-haven demand. Trump says despite the US blockade on the Strait of Hormuz, the two sides are in contact and negotiations are still underway. These comments from Trump look to have bene verified by press with Reuters reporting today that communication between the two sides was still intact. As such, we’re seeing a better tone to risk appetite this morning which is keeping USD pressured for now. While news flow remains supportive and traders get the sense that negotiations will continue, USD should remain under offer as the de-escalation trade continues through markets.
PPI & Fed Speakers Due
Looking ahead today, traders will be watching the latest US PPI data along with a slew of Fed speakers due later in the day. PPI is expected to have risen to 1.2% from 0.7% on the headline reading while core is expected unchanged at 0.5%. While inflation risks have been clearly underscored by last week’s bumper CPI report, the Dollar can remain weak today even if PPI comes in strong provided there is no deterioration in the Iran war back drop. Energy prices are cooling today and look set to fall further if negotiations get back on track, which should help reduce inflation expectations over the year, particularly if the two sides are able to agree a proper peace deal and put an end to the conflict. For now, USD looks prone to a further drift lower though any hawkish comments from Fed members later could cause some intra-day volatility.
Technical Views
DXY
The sell off in the index has seen price breaking down further below the 99.15 level, now probing sub-98.24. The retest of the broken bear channel highs is just below here, marking a key support area. If breached, focus turns to 96.63 as the deeper support to watch.
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