ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner note that the US Dollar (USD) has stabilised after Iran said the ceasefire was violated, but still see scope for renewed weakness. They highlight that Federal Reserve (Fed) minutes reinforced two‑sided risks and leave room for dovish repricing in Fed expectations.

Fed risks and Gulf headlines steer Dollar

"Iran said yesterday that the ceasefire had been violated, helping the dollar recover a small portion of losses. That serves as a reminder that the situation remains highly uncertain and that small bouts of re‑escalation are still possible even if the conflict moves towards a broader resolution."

"On the macro side, the Federal Reserve minutes yesterday caused a small hawkish reaction – with swap rates now embedding only 7bp of easing by year-end after touching 15bp earlier yesterday. The main highlight of the minutes, in our view, was however the reinforcement of two-side risks stemming from the war, with faster cuts discussed as an option should job losses outpace inflation. We see room for dovish repricing in Fed expectations from here – a dollar negative."

"Headline trading still dominates. Evidence that traffic through the Strait of Hormuz is picking up could add pressure on the dollar, but a more durable move would likely require signs that the ceasefire evolves towards a lasting arrangement. Otherwise, markets may start to grow nervous again once the two‑week ceasefire nears expiry."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)