Two-Week Ceasefire Pressures DXY, FOMC Key
The US Dollar Index (DXY), which measures the dollar's strength against a basket of six major currencies, weakened and traded around 99.05 during the Asian session on Wednesday (April 8). The weakening occurred after US President Donald Trump agreed to a two-week ceasefire, following earlier threats of a major attack.
Trump stated on Tuesday evening that he agreed to "suspend bombings and attacks on Iran for a two-week period" on the condition that Iran reopen the Strait of Hormuz. On the Iranian side, Foreign Minister Abbas Araghchi stated that safe passage through the key waterway would be possible for two weeks through coordination with the Iranian armed forces.
The market believes this development has the potential to reduce demand for the dollar as a hedge against geopolitical risks. However, market participants are closely monitoring the implementation of the ceasefire and dynamics in the Strait of Hormuz, given that the area is a strategic route sensitive to logistical and energy disruptions.
The US and Iran are scheduled to meet in Islamabad, Pakistan, on Friday to finalize the details of the agreement. Any further signs of de-escalation could further undermine the dollar's appeal as a safe haven, while renewed signs of tensions risk reinstating defensive demand for USD-denominated assets.
Beyond geopolitical factors, market focus shifts to the release of the Federal Open Market Committee (FOMC) meeting minutes on Wednesday. This document is closely watched for Federal Reserve officials' assessment of the latest energy shocks related to the conflict in the Middle East, which could impact inflation expectations and the direction of interest rates.
A more hawkish tone from the Fed could potentially provide near-term support for the dollar against other major currencies. Meanwhile, interest rate market indicators show overnight-indexed swaps signaling a probability of around 40% for a Fed rate cut by year-end, according to the CME FedWatch Tool—making the contents of the minutes, developments in negotiations in Islamabad, and conditions in the Strait of Hormuz key variables the market will be monitoring next. (asd)
Source: Newsmaker.id
