The US dollar traded within a range as market sentiment stayed cautious due to limited progress in the Middle East. Optimism about potential progress toward an agreement with Tehran reduced immediate safe-haven demand and capped further gains. Uncertainty about the negotiation path kept markets wary, with improved talks likely pressuring the dollar and worsening talks likely supporting it alongside Treasury yields through renewed inflation concerns and risk aversion. Federal Reserve meeting minutes reinforced expectations of tighter policy, with policymakers increasingly concerned that higher oil prices could sustain inflation. More policymakers signaled openness to additional monetary tightening if needed, helping keep Treasury yields elevated. Upcoming initial jobless claims and PMI data could shift expectations for monetary policy and add volatility to currency and bond markets.
"The US dollar continued to trade within a range on Thursday as sentiment remained cautious amid limited progress in the Middle East. Optimism that Washington could move closer to an agreement with Tehran helped cap additional gains in the currency and reduce immediate safe-haven demand. However, markets remain cautious given the uncertain path of negotiations."
"Signs of progress could pressure the dollar, while any deterioration in talks would likely support both the currency and Treasury yields through renewed inflation concerns and risk aversion. At the same time, the Federal Reserve's latest meeting minutes reinforced a more hawkish tilt in expectations."
"Policymakers expressed growing concern that elevated oil prices could sustain inflationary pressures, with an increasing number signalling openness to further monetary policy tightening if required. As a result, Treasury yields could remain elevated, supporting the dollar."
"Attention now turns to initial jobless claims and PMI figures. While jobless claims have edged higher in recent weeks, broader labour market conditions remain resilient. Any meaningful surprises from today's releases could influence expectations around monetary policy and inject fresh volatility into both currency and bond markets."
Read at London Business News | Londonlovesbusiness.com
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