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Tensions in the Middle East boost the dollar as the market awaits U.S. PCE data
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Hello everyone, today XM Forex will bring you "[XM official website]: Tensions in the Middle East boost the US dollar, the market is waiting for US PCE data". Hope this helps you! The original content is as follows:
The U.S. dollar index fluctuated in the Asian session on Thursday. The U.S. dollar hit its lowest level in a month against a basket of major currencies on Wednesday. It was affected by the relieved rise in risk assets driven by the two-week ceasefire agreement between the United States and Iran. However, due to the fragile ceasefire situation, Iran's attack on oil facilities of Gulf neighbors and Israel's intensification of attacks on Lebanon, it recovered some of its losses. The U.S. dollar index closed at 99.077 at the end of the day, up 0.16%. Thursday will see February's core personal consumption expenditures (PCE) price index, fourth-quarter gross domestic product (GDP) and weekly jobless claims data, followed by March's consumer price index (CPI) on Friday and the University of Michigan's (UoM) preliminary April consumer confidence and inflation expectations readings.
Analysis of major currency trends
GDP
USD: As of press time, the U.S. dollar index is hovering around 99.09. The U.S. dollar was previously one of the main beneficiaries of the Iran war because the United States, as a net energy exporter, was less affected by oil; as oil prices fell sharply, traders again believed that the Federal Reserve has a 50% probability of cutting interest rates before the end of the year, while it was previously expected that there would be no interest rate cut. Trump withdrew his threat to "destroy civilization" before the deadline. The ceasefire agreement was premised on Iran agreeing to suspend its blockade of the Strait of Hormuz. Iran said it might open the strait before negotiations, but the speaker of the Iranian parliament said three key clauses had been violated. From a technical perspective, the U.S. Dollar Index has decisively broken below the ascending parallel channel that has guided price action since late January, indicating a shift in the short-term structure. It has repeatedly failed to sustain above the 100.00–100.50 range, a multi-month resistance area that has limited gains since May 2025. The latest phase of decline has pushed prices towards the key converging support zone on the 50-day, 10-dayThe 0-day and 200-day simple moving averages (SMA) are converging around the 98.50-98.60 area. The initial resistance above is located in the 100.00-100.50 range. Unless prices sustainably break out of this range, the rebound may be limited.



1. Iranian Speaker: Three key clauses in the 10-point proposal have been violated before the start of negotiations
Qalibaf, Speaker of the Islamic Parliament of Iran, issued a statement saying that three key clauses in the 10-point proposal have been violated before the start of negotiations. These include: 1. Non-compliance with the terms of the Ten-Point Proposal regarding the ceasefire in Lebanon - which the Prime Minister of Pakistan has clearly mentioned and declared to be "a xmaccount.comprehensive ceasefire with immediate effect everywhere, including in Lebanon and other areas"; 2. An intruding drone entered Iranian airspace and was destroyed in the city of Lal in Fars Province, which is a clear violation of the terms prohibiting any further violations of Iranian airspace; 3. Denial of Iran's right to enrich uranium, which is included in Article 6 of the framework. Today, the "practical conditions" that were supposed to be the basis for negotiations have been blatantly and unambiguously undermined, even before negotiations began. Under these circumstances, a bilateral ceasefire or negotiations are unreasonable.
2. The top Democratic leaders of the U.S. House of Representatives have sent a signal: they are willing to push for the invocation of the 25th Amendment to remove Trump
The Democratic leadership of the U.S. House of Representatives took a dramatic step on Wednesday and began to support a long-shot motion to remove Trump through the 25th Amendment to the Constitution. Rep. Jamie Raskin (D-Md.), the top Democrat on the House Judiciary xmaccount.committee, will host a virtual briefing on "Trump Administration Accountability and the 25th Amendment" on Friday afternoon, House Minority Leader Hakeem Jeffries (D-N.Y.) said in a letter to colleagues on Wednesday. "It is shocking that Trump made vulgar remarks on Easter Sunday, threatening to escalate the war he has chosen to start and destroy an entire civilization," Jeffries wrote, referring to Trump's social media posts. "We will continue to apply maximum pressure on Republicans, urging them to put their patriotic duty over partisan loyalty and democracy. Party members work together to stop this crazy behavior. ”
3. Federal Reserve meeting minutes: Policymakers are concerned about the dual risks of the Iran war
After the outbreak of the Iran war, Federal Reserve officials weighed different scenarios facing the U.S. economy, including scenarios that require interest rate cuts and scenarios that may require interest rate increases. The minutes of the March FOMC meeting released on Wednesday showed that most officials were worried that the war might affect the economy.hit the labor market, requiring lower interest rates. At the same time, many officials also highlighted the risk of inflation, which may ultimately require a rate hike. The minutes showed that more and more officials suggested adding relevant statements to the post-meeting statement to mention the possibility of raising interest rates under certain conditions. The minutes of the meeting stated: "Some participants believed that there were good reasons to provide a two-way description of future interest rate decisions in the post-meeting statement to reflect that it may be appropriate to raise the interest rate target range when inflation continues to be above the target level." After the March meeting, many Fed policymakers have expressed their preference to keep interest rates unchanged while assessing the impact of the war. Overall, policymakers' response to the war reflected concern for the risks of both aspects of its dual mission. The minutes stated: "The vast majority of participants believe that the risks of upward inflation and downward risks of employment are at a high level, and most participants pointed out that these risks have increased with the development of the situation in the Middle East." At the March meeting, Fed officials maintained the benchmark policy interest rate at a range of 3.5% to 3.75%.
4. The probability of the Federal Reserve keeping interest rates unchanged in April is 98.4%, and the probability of cutting interest rates within the year has dropped to 22.3%.
According to CME "Fed Watch": The probability of the Federal Reserve raising interest rates by 25 basis points in April is 1.6%, and the probability of keeping interest rates unchanged is 98.4%. The probability that the Fed will cut interest rates by 25 basis points cumulatively by June is 1.7%, the probability of keeping interest rates unchanged is 96.8%, and the probability of raising interest rates by 25 basis points cumulatively is 1.5%. The probability that the Fed will cut interest rates by 25 basis points cumulatively by December has dropped to 22.3% (from 40.8% the day before), the probability of keeping interest rates unchanged is 74% (42.4% the day before), and the probability of raising interest rates by 25 basis points has dropped to 3.7% (from 16.8% the day before).
5. The United States is considering lifting sanctions on the Central Bank of Venezuela
According to people familiar with the matter, the United States is considering lifting sanctions on the Central Bank of Venezuela. The move would allow oil sales revenues to flow more freely through Venezuela's financial system, restoring a key channel for hard currency flows into the country after years of isolation from the global banking system. According to people familiar with the matter, about US$1 billion has been transferred to the Venezuelan central bank, but a large part of it has not yet reached the hands of relevant enterprises because the bank is still undergoing xmaccount.compliance reviews. Delays in payments could derail Trump's plans to quickly boost Venezuelan crude output and revive the country's economy. Meanwhile, the war with Iran is straining global crude supplies and pushing U.S. gasoline prices to their highest levels in more than three years, putting political pressure on Trump.
Institutional view
1. Capital Economics: The Iran war has not significantly changed the risk appetite of the U.S. market
Capital Economics stated in a report that if the ceasefire does eventually lead to the end of the war, then the conflict will have little impact on the risk appetite of investors in the U.S. market. Capital Economics' head of Asia-Pacific markets noted that despite the ceasefireMarket sentiment has improved since then, but uncertainty remains, with issues such as how the Strait of Hormuz will be reopened remain unresolved. Despite this, there has been no substantial shift in investor risk appetite, with key risk premium indicators such as the S&P 500 excess earnings yield and the 10-year Treasury term premium rising only slightly. Capital Economics said this may reflect the market's perception that the Trump administration is willing to avoid escalation despite market pressure. Still, analysts warn that deeper geopolitical divisions may be structural and will support a broader repricing of risks over the medium term.
2. Westpac Bank: The Federal Reserve Bank of New Zealand may raise interest rates in September instead of December
Westpac New Zealand’s chief economist said that the Federal Reserve Bank of New Zealand may raise interest rates in September instead of December as previously expected by the bank. The economist wrote in a note that although the Reserve Bank of New Zealand kept interest rates unchanged as widely expected, its "comments were hawkish, with concerns about a second round of rising inflationary pressures quite prominent." "If there is evidence of a second round of inflationary effects building up, then the balance of risks would favor an earlier rate hike than September," the economist added. Westpac brought forward its tightening path of 25 basis points of rate hikes per RBNZ meeting, which is expected to begin in September.
3. Analyst: The British economy is weak and the Bank of England is not expected to raise interest rates aggressively
Ebury analyst Enrique Diaz-Alvarez said in a report that although the United Kingdom faces inflation risks, the Bank of England is expected to remain cautious in raising interest rates. He pointed out that British economic growth is weak and labor market conditions are fragile, so Bank of England members will be wary of aggressive interest rate hikes that could plunge the UK into recession. Data shows that investors have now fully priced in two 25 basis point interest rate hikes by the Bank of England before September.
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