Dollar Stumbles As Ceasefire Lifts Appetite For Risk

    by VT Markets
    /
    Jun 25, 2025

    The US dollar extended its losses on Wednesday, unable to recover as global markets embraced risk following news of a fragile ceasefire between Iran and Israel. US President Donald Trump helped broker the deal earlier this week, ending at least temporarily 12 days of aerial conflict.

    While the de-escalation in the Middle East offered some relief to investors, economic signals from the United States remain mixed. In his semi-annual testimony to Congress, Federal Reserve Chair Jerome Powell maintained a cautious tone and gave no clear indication of imminent rate cuts.

    Markets, however, are moving ahead with their expectations. According to the CME FedWatch Tool, there is now an 18% probability of a rate cut as early as July, with close to 60 basis points of easing anticipated by December. This shift is largely driven by softening consumer sentiment. June data revealed an unexpected decline as American households expressed growing concerns about job prospects.

    This dovetails with a broader drop in yields. The two-year Treasury yield slid to a six-week low of 3.7870%, while the benchmark 10-year yield remained subdued at 4.3043%, reflecting weaker policy expectations in the near term.

    Technical Analysis

    The dollar’s decline continued, settling at 97.43, well below Tuesday’s peak of 98.99. Price action reflects a persistent downtrend, with the greenback struggling to reclaim the 97.70 level. Momentum remains firmly bearish. The MACD is still in negative territory, and all major moving averages are sloping downward with no immediate signs of reversal.

    Bearish momentum dominates as the dollar hovers near 97.30 lows, as seen on the VT Markets app.

    Should upcoming economic data continue to fall short of expectations—and if inflation softens despite the reintroduction of tariffs—the Fed may be compelled to lower interest rates by the third quarter. Such a scenario would likely put additional downward pressure on the dollar, especially against the euro and risk-sensitive currencies.

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