• US Dollar Index weakens as a temporary US-Iran truce ahead of Doha peace talks reduced safe-haven demand.
• The Greenback’s downside could be restrained as sensitive traders continually re-evaluate Middle East developments.
• The CME FedWatch Tool shows traders pricing in a 79.5% probability of rate hikes in December.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, continues its losing streak for the third consecutive day and is trading around 101.20 during the European hours on Monday.

The US Dollar remains subdued on easing safe-haven demand following reports that Washington and Tehran have agreed to halt attacks against each other before peace talks resume in Doha this week.

However, the downside of the Greenback could be limited as traders remain cautious amid fluid Middle East headlines, assessing regional stability and its impact on global risk sentiment. This diplomatic window opens after days of retaliatory strikes, which began Thursday when an Iranian projectile hit a cargo vessel. Both Washington and Tehran subsequently accused each other of violating the June 17 interim ceasefire. Official delegations are set to meet in Qatar on Tuesday to negotiate an end to the conflict.

Moreover, persistent hawkish Federal Reserve (Fed) expectations are cushioning the US Dollar. The CME FedWatch Tool suggests that traders are currently pricing in 79.5% probability of rate hikes in December. This week's key labor market reports, culminating in Thursday’s Nonfarm Payrolls (NFP) data, are expected to provide critical clues regarding the Fed's interest rate trajectory. Forecasters anticipate June job growth to come in at 114,000, with the unemployment rate expected to remain flat at 4.3%.