The US dollar has reacted little to recent strikes in Iran, even though it was previously undervalued. The market often punishes the dollar quickly but rewards it slowly. If oil prices stay high for a while, this could shift as more people seek the dollar for stability. There are signs of possible disruptions in the Strait of Hormuz, which might raise oil prices and impact the dollar. Right now, Brent crude has climbed above $80 per barrel and is stabilizing around $78. If geopolitical concerns fade swiftly, the market may return to favor USD shorts due to bearish factors within the US.

Market Focus

Data is expected to play a small role this week. The key item on the US calendar is Friday’s core PCE figure, which is predicted to be 0.1%. The Federal Reserve is cautious, so this is unlikely to change rate expectations. Jerome Powell will be speaking in Congress, addressing these issues. Additionally, S&P Global PMIs are expected to drop, and consumer confidence will be watched for any changes above the 100.0 mark. We should closely monitor risk sentiment in energy markets. While the dollar has not reacted much to military activity, that doesn’t mean we should ignore the potential aftershocks. Notably, Brent crude’s price has found support above $78 per barrel, briefly approaching $80. This indicates that risk premiums may be forming quietly, although not rapidly yet. If threats at strategic locations like the Strait of Hormuz become more certain, oil prices could rise quickly, increasing demand for dollars as a safe haven. It’s not a straightforward cause-effect situation; trader actions depend on risk perceptions. The dollar’s behavior in these situations remains consistent. It still responds quickly to bad news but does not gain ground as fast when those worries lessen. It’s important to keep this in mind. If recent tensions ease without escalating, we could see renewed pressure on the dollar, especially from those holding negative views on the US economy.

Key Events And Data

Looking at the upcoming calendar, we see a lack of meaningful data, which means we should pay extra attention to the smaller details. The main focus will likely be Friday’s PCE inflation figure. Estimates suggest a 0.1% month-on-month increase, which is a mild figure and unlikely to significantly change Federal Reserve expectations. Therefore, short-term swap pricing will probably remain stable. However, Chair Powell’s appearance before Congress could lead to some repositioning, even if he sticks to the Fed’s current messaging. Any acknowledgment of geopolitical risks or market weaknesses could have more influence than usual due to the lack of other data. Aside from that, S&P Global PMIs are expected to trend slightly downward. The impact on USD will depend on how investors see the link between slowing manufacturing and the Fed’s patience. We are also watching consumer confidence data; any dips below 100.0 might raise doubts about Q3 consumption trends. Our focus is more on how expectations shift around these numbers rather than on trading them directly. In summary, while scheduled events may not provide clear direction, positioning can change gradually. The interaction between energy prices, weaker indicators, and Powell’s language will be key in shaping market sentiment. Thus, we will prioritize tone and timing over the numbers alone. Create your live VT Markets account and start trading now.

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