Dollar stable as tensions in Strait of Hormuz escalate

The US dollar remained resilient against its peers in European trading on Tuesday, following Monday’s bearish movement. Although markets remain optimistic about a peace deal between Iran and the United States, escalating tensions in the Strait of Hormuz don’t allow risk flows to dominate the action. In the second half of the day, the US economic calendar will feature the Conference Board’s (CB) Consumer Confidence Index data for May and the Federal Reserve Bank of Dallas will publish the Manufacturing Business Index. The positive shift seen in risk mood on Monday made it difficult for the USD to find demand as investors reacted to news suggesting that the US and Iran were moving closer to signing a deal to extend the ceasefire for another 60 days, open the Strait of Hormuz fully and negotiate the remaining issues, such as Iran’s nuclear programme, during the truce period. However, reports of the US military targeting Iranian missile launch sites and mine-laying vessels in southern Iran in what it called “self-defense strikes” caused investors to adopt a cautious stance late Monday. Iran’s Fars news agency reported that a senior spokesperson for Iran’s Armed Forces said that any new aggression against Iran will be met with a “far more severe” response that extends beyond the region. In the meantime, Iranian negotiators are meeting with Qatari mediators in Doha to finalise a memorandum of understanding (MOU) with the US. Reportedly, language over Iran’s nuclear programme and sanctions remain as point of contentions. The DXY Dollar Index clings to modest daily gains above 99.00 after losing 0.3% on Monday. The benchmark 10-year US Treasury bond yield is down about 1% on the day near 4.5% and US stock index futures rise between 0.7% and 0.9%. EURUSD struggles to build on Monday’s gains and moves sideways below 1.1650 on Tuesday. GBPUSD climbed to its highest level in ten days above 1.3500 on Monday, but lost its bullish momentum early Tuesday, trading near 1.3480, losing 0.2% on the day. USDJPY stays relatively quiet at around 159.00 after closing marginally lower on Monday. Gold reverses its direction after rising more than 1% on Monday and XAUUSD declines toward $4,500 early Tuesday. NZDUSD stays under bearish pressure and loses more than 0.3% on the day near 0.5850. In the Asian session on Wednesday, the Reserve Bank of New Zealand (RBNZ) will announce monetary policy decisions. Markets widely expect the RBNZ to leave the interest rate unchanged at 2.25%. (Source: OANDA) The post Dollar stable as tensions in Strait of Hormuz escalate appeared first on Financial Mirror.