US-Iran truce hopes and PPI failure bolster Fed taper bets Dollar extends fall against all other major currencies Yen second biggest loser as BOJ taper bets taper Stocks reflect ceasefire optimism, and gold also gains ground
Trump says new US-Iran talks could happen soon
The decline continued on Tuesday, losing ground against all major peers, as hopes for further progress in U.S.-Iran truce negotiations allowed investors to increase their risk exposure, despite the ongoing U.S. blockade of ships entering and leaving Iranian ports.
Market optimism was further strengthened yesterday after US President Trump told the New York Post that new peace negotiations “could take place over the next couple of days.” Reuters also reported that there had been progress toward a permanent agreement between the two countries.
However, the blockade of Iranian ports makes things a little more complicated. The move took effect Monday after weekend negotiations failed to produce a permanent agreement, and it threatens to further strain already limited oil flows through the Strait of Hormuz if the two countries fail to find common ground. Perhaps this is why dollar sellers are taking a break today.
Colder-than-expected PPI data weighs on the US dollar
What may also have contributed to lowering the greenback yesterday were the colder than expected US PPI figures. Although the rate jumped from 3.4% to 4.0% year-on-year due to rising oil prices, it fell short of expectations for a larger increase to 4.6%, while the rate remained stable at 3.8% year-on-year instead of rising to 4.2%.
Combined with comments from former Treasury Secretary Janet Yellen, who said she expected at least one rate cut from the Fed this year, this allowed traders to assign a decent 45% probability of a quarter-point rate cut by December. Such a move is almost all in by July 2027. A permanent truce in the Middle East could make it even more likely that the Fed will cut interest rates much sooner, pushing the U.S. dollar even lower.
The yen gains against the dollar, but suffers against other currencies
The yen too…
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