The US Dollar is falling, crude oil prices are decreasing, and the Israeli Shekel is gaining strength by about 2%. Overall, market sentiment towards risk is improving at the beginning of a busy week. The DXY Index is expected to stay between 90 and 95. While tensions in the Middle East persist, the situation is under control for now. President Trump’s remarks suggest that the US will not get involved immediately, leaving future developments uncertain.

Key Events This Week

This week, all eyes are on the Bank of Japan, the Federal Reserve, the Swiss National Bank, and the Bank of England as they make policy decisions. The G7 summit in Canada is also significant. The Swiss National Bank is likely to lower its policy rate by a quarter-point, and guidance on future policies will be crucial, particularly from the Federal Reserve. At the G7 summit, ongoing trade discussions could enhance positive risk sentiment if progress is made. The US Dollar had a brief uptick due to geopolitical risks, but overall downward pressure remains. The DXY continues its decline, and unless geopolitical tensions rise again, a further drop is likely. With the US dollar in a downward trend and oil prices declining, there is a shift in the global market towards less defensive strategies. Risk appetite is starting to grow again, aided by a relatively stable geopolitical situation. The Shekel’s gain of roughly 2% signals investors are returning to higher-yielding currencies. Looking at the larger picture, the DXY Index, which measures dollar strength, is still on a downward path, aiming for the 90-95 range. This projection could change only if external factors push traders back to the safety of the dollar. Recent Middle East tensions haven’t worsened, and Trump’s comments suggest no immediate military action, so we don’t anticipate any sudden shifts. This week is a crucial moment for the markets. Updates from the Federal Reserve, Bank of Japan, Bank of England, and Swiss National Bank will be important. The focus is especially on the Federal Reserve—how Chair Powell communicates plans for rates may matter more than any changes in the rates themselves. Although no major changes are expected from the Fed or the others besides Switzerland, forward guidance could lead to adjustments in positioning.

Implications For The Swiss National Bank And G7 Summit

The Swiss National Bank is set to cut rates by a modest quarter-point. Their hesitation to heavily intervene, combined with lower inflation, allows them to take action now. We should pay close attention to currency strength for both the SNB and the Bank of Japan, particularly if their currencies strengthen against the dollar. At the G7 summit, trade discussions will be back in focus. Any positive movement, especially involving the United States, could increase risk appetite in the markets. Such resolutions could weaken the dollar’s limited appeal as a safe haven and continue its downward trend. It’s important to note that the recent rise in the USD was more of an immediate reaction and less based on solid fundamentals. As this sentiment cools, we are likely returning to a phase where interest rate expectations and growth rates take precedence—both of which currently favor a weaker dollar. Volatility might increase leading up to the central bank announcements, but traders should watch for changes in yields, especially for long-term Treasuries. Any adjustment there could influence FX markets and determine if the USD finds temporary support. There’s also a growing likelihood that expectations for more Fed rate cuts this year could solidify, further pressuring the dollar. In summary, market participants should be cautious of unexpected news, whether geopolitical or from central bankers. However, if no new shocks emerge, the overall outlook suggests more weakness for the dollar, slight support for currencies that import energy, and a continued convergence of central bank policies, mainly affecting the dollar. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now