The U.S. dollar weakened on Tuesday as global markets reacted positively to news of a ceasefire between Israel and Iran, sparking a widespread appetite for riskier assets. The Dollar Index declined by 0.3% to 97.752 at 08:00 GMT, though it remains higher for the week overall.
Former U.S. President Donald Trump’s confirmation of the ceasefire helped ease geopolitical tensions that had recently bolstered the dollar and pushed oil prices upward. The subsequent fall in crude prices contributed to the dollar’s decline, while currencies sensitive to risk gained ground.
Analysts at ING pointed out that the “moderate” strength of the dollar driven by geopolitical fears has “waned” following the correction in oil prices. Market attention now turns to Federal Reserve Chair Jerome Powell’s upcoming testimony before Congress, where political pressure from Trump to lower interest rates by “two to three points” could raise questions about the Fed’s independence.
Sterling and Euro Gain
- GBP/USD jumped 0.7% to 1.3596, supported by increasing domestic food inflation. Data from Kantar revealed that food prices rose 4.7% in the four weeks ending June 15—the fastest pace since March 2024—fueled by higher costs for staples such as butter, chocolate, and meat. This surge may complicate the Bank of England’s efforts to reduce interest rates.
- EUR/USD edged up 0.1% to 1.1591, benefiting from lower energy costs and improved business sentiment in Germany. The Ifo business climate index climbed to 88.4 in June, surpassing expectations as companies grew more optimistic about the economic outlook.
Yen Recovers, Yuan Stable
- USD/JPY dropped 0.8% to 144.97 as the yen rebounded from earlier losses. Traders are awaiting Tokyo’s inflation data for clues about the Bank of Japan’s future policy direction.
- USD/CNY dipped slightly to 7.1780 after China’s central bank held its benchmark lending rate steady, signaling cautiousness amid weak economic indicators.