DXY Pares Gains after Jobs Report

The dollar index traded around 101 on Tuesday, hovering near its highest level since May 2025 as investors assessed signs of progress in US-Iran peace talks while continuing to gauge the outlook for Federal Reserve interest rate hikes this year. In a key development, Washington granted Tehran a 60-day license to sell oil on international markets, boosting expectations of a faster recovery in global supply. Meanwhile, markets remain positioned for Fed rate hikes following the central bank’s hawkish stance last week and upward revisions to its inflation projections. Both Deutsche Bank and BofA Global Research have updated their forecasts to include a rate increase in September. Investors are now focused on this week’s PCE report, which contains the Fed’s preferred inflation measure and could offer fresh clues on underlying price pressures.

The dollar index rose to 101 on Monday, reaching a new high in more than a year, as investors returned from the long weekend and refocused on developments in the Middle East and the monetary policy outlook. The US and Iran agreed on a roadmap toward a final deal to end their conflict within 60 days, with Iran’s foreign minister citing “progress” in negotiations, contributing to a decline in oil prices. However, markets continue to anticipate that the Federal Reserve will raise the fed funds rate this year, following a hawkish tone from the Fed last week and upward revisions to inflation forecasts. Attention now turns to this week’s PCE report, which includes the Fed’s preferred inflation gauge and is expected to provide fresh insight into underlying price pressures. The dollar strengthened most against the Japanese yen amid rising intervention concerns, while it weakened slightly against the British pound following UK Prime Minister Keir Starmer’s resignation.

The dollar index traded around 100.9 on Monday, remaining close to its strongest level since May 2025 as investors assessed evolving developments in US-Iran peace negotiations while awaiting a key US inflation reading. Reports suggested that Washington and Tehran had agreed on a roadmap toward a final deal within 60 days, easing concerns after both sides exchanged fresh threats linked to the conflict in Lebanon. Market participants are now focused on this week's US PCE price index release, the Federal Reserve’s preferred measure of inflation. Last week, the Fed left interest rates unchanged but struck a more hawkish tone. Nine of the 19 policymakers now anticipate at least one rate increase before the end of the year, with markets increasingly pricing in a potential hike as early as September. Elsewhere, traders continued to monitor the Japanese yen amid rising intervention concerns and the British pound against the backdrop of political uncertainty in London.