The US dollar hovered near a 10-month high on Monday and is on track to post its largest monthly gain since July, as mixed signals from Iran and the United States weakened hopes for a swift end to the conflict in the Middle East.

US President Donald Trump said that Iran’s new leaders were “very rational,” as additional US forces arrived in the region, while Tehran warned that it would not accept humiliation.

Meanwhile, the Japanese yen hovered near the critical ¥160 per dollar level after hitting its weakest level since July 2024, a threshold at which Tokyo previously intervened to support its currency. The euro, on the other hand, found some support from expectations of interest rate hikes by the European Central Bank.

Hormuz tensions support the dollar

Markets have experienced sharp volatility this month after the conflict with Iran effectively led to the closure of the Strait of Hormuz, a vital waterway through which about one-fifth of global oil and gas flows pass, while Brent crude futures continued to gain after Yemen’s Houthi group launched its first attacks on Israel.

The dollar has benefited from its safe-haven status since early March, as economies such as Japan and the eurozone have been hurt by rising oil prices, while the United States has relatively benefited as a net exporter of crude oil.

Barclays noted that market sentiment toward the dollar is approaching “extreme optimism” levels based on its indicators, which rely on traditional measures including growth expectations, interest rate differentials, and risk indicators.

The dollar index rose 0.1% to 100.28 points, after reaching 100.54 in mid-March, the highest level since May 2025, and is heading for its largest monthly gain since July 2025.

Chris Turner, Head of Global Foreign Exchange Strategy at ING, said: “Unless clear and conciliatory messages come from the Iranian side, it will be difficult for the dollar to give up its gains achieved this month anytime soon.”

US jobs data in focus

Investors are closely watching US employment data due later this week, which could influence expectations for the Federal Reserve’s policy path.

Bob Savage, Head of Market Macro Strategy at BNY, said: “In the midst of the storm, this week delivers a critical set of US labor market data.”

He added: “After a weak February jobs report and a full month of conflict in the Middle East, we are keen to see how labor market conditions have been affected.”

European interest rate outlook

The euro traded near $1.15 and is heading for a decline of about 2.5% in March, its largest monthly drop since July.

Thu Lan Nguyen, Head of FX and Commodity Research at Commerzbank, said the euro would have declined further against the dollar were it not for market expectations of a more hawkish stance from the European Central Bank.

She added that downside risks for the euro/dollar pair will remain limited as long as expectations of tighter European monetary policy persist.

Before the outbreak of the conflict, markets were pricing more than a 50% probability of rate cuts in Europe, but are now pricing in the possibility of a rate hike before the end of the year.

Yen nears intervention level again

The Japanese yen rose 0.40% to ¥159.65 against the dollar after hitting ¥160.47 during Asian trading, its weakest level since July 2024.

The move came after Japan intensified warnings of intervention to support the currency, noting that further depreciation could justify a near-term interest rate hike. The yen had fallen more than 2% during March due to concerns over rising oil prices.

Among other currencies, the Australian dollar fell 0.3% to $0.6851 and is heading for a monthly loss of 3.8%, its largest since December 2024. The New Zealand dollar also declined 0.4% to $0.57275, recording a drop of about 4.4% during March.

Silver prices rose in European trading on Monday, extending their move in positive territory for the second consecutive day, supported by buying from three-month lows and the current slowdown in the US dollar.

Federal Reserve Chair Jerome Powell is scheduled to speak later today at an event hosted by Harvard University, with his remarks expected to provide new clues about the path of US interest rates this year.

Price Overview

Silver prices today: silver rose 2.1% to $71.24, up from the session opening level of $69.79, after hitting a low of $67.69.

At Friday’s settlement, silver gained 2.5%, supported by a rebound from a three-month low of $61.01 per ounce.

As a result of this recovery, the white metal, silver, rose 2.8% last week, marking its first weekly gain in the past month.

US dollar

The dollar index fell about 0.2% on Monday, retreating from a two-week high of 100.34 points, reflecting a slowdown in the US currency against a basket of major and minor currencies.

Beyond profit-taking, the US dollar is weakening as investors assess developments in the Iran war and the strong likelihood of a new round of negotiations between the United States and Iran in Pakistan aimed at ending the ongoing conflict in the Middle East.

US interest rates

According to the CME FedWatch tool, markets are currently pricing a 96% probability that US interest rates will remain unchanged at the April meeting, while the probability of a 25-basis-point rate hike stands at 4%.

To reassess these expectations, investors are closely monitoring further economic data releases from the United States, in addition to tracking comments from Federal Reserve officials.

Jerome Powell

At 15:30 GMT, an event hosted by Harvard University in Massachusetts will begin, with Federal Reserve Chair Jerome Powell participating, where questions from the audience are expected.

Silver outlook

We at Economies.com expect that if Powell’s comments come in less hawkish than market expectations, the US dollar will extend its losses, leading to further gains in precious metals prices, including gold and silver.

Gold prices rose in European trading on Monday, extending their recovery for the second consecutive day from four-month lows, supported by notable investment demand and bargain buying, alongside the current slowdown in the US dollar against a basket of global currencies.

Federal Reserve Chair Jerome Powell is scheduled to speak later today at an event hosted by Harvard University, with his remarks expected to provide new clues about the path of US interest rates this year.

Price Overview

Gold prices today: gold rose about 1.3% to $4,550.71, up from the session opening level of $4,492.56, after hitting a low of $4,417.74.

At Friday’s settlement, gold gained 2.65%, marking its third gain in the past four days, supported by a rebound from a four-month low of $4,098.23 per ounce.

As a result of this recovery, gold prices ended last week little changed, following a three-week streak of weekly losses.

US dollar

The dollar index fell about 0.2% on Monday, retreating from a two-week high of 100.34 points, reflecting a slowdown in the US currency against a basket of major and minor currencies.

Beyond profit-taking, the US dollar is weakening as investors assess developments in the Iran war and the strong likelihood of a new round of negotiations between the United States and Iran in Pakistan aimed at ending the ongoing conflict in the Middle East.

US interest rates

According to the CME FedWatch tool, markets are currently pricing a 96% probability that US interest rates will remain unchanged at the April meeting, while the probability of a 25-basis-point rate hike stands at 4%.

To reassess these expectations, investors are closely monitoring further economic data releases from the United States, in addition to tracking comments from Federal Reserve officials.

Jerome Powell

At 15:30 GMT, an event hosted by Harvard University in Massachusetts will begin, with Federal Reserve Chair Jerome Powell participating, where questions from the audience are expected.

Gold outlook

Daniel Pavilonis, Senior Market Strategist at RJO Futures, said the recent decline in prices has created an excellent investment opportunity, as prices fell below the 200-day moving average, making it an ideal time to buy gold.

Pavilonis added that a gradual rise is expected over the next two weeks, and if the situation surrounding Iran stabilizes, there will be a strong opportunity for investment.

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were little changed on Friday, keeping the total at 1,052.71 metric tons.

The euro rose in European trading on Monday against a basket of global currencies, as it attempts to recover after four consecutive days of losses against the US dollar, benefiting from a slowdown in the US currency, as investors assess developments in the Iran war and the likelihood of a new round of negotiations between the United States and Iran in Pakistan.

Following more hawkish comments from the President of the European Central Bank last week, expectations for at least one interest rate hike this year have increased. To reassess those expectations, markets are awaiting the release of key inflation data from Germany, the eurozone’s largest economy, later today.

Price Overview

Euro exchange rate today: the euro rose about 0.2% against the dollar to $1.1521, up from the session opening level of $1.1500, after hitting a low of $1.1487.

The euro ended Friday’s session down 0.15% against the dollar, marking its fourth consecutive daily loss, amid continued escalation of military confrontations in the Middle East.

The euro declined 0.55% against the dollar last week, recording its third weekly loss over the past month, due to concerns over the repercussions of the Iran war and its negative impact on the European economy.

US dollar

The dollar index fell 0.2% on Monday, retreating from a two-week high of 100.34 points, reflecting a slowdown in the US currency against a basket of major and minor currencies.

Beyond profit-taking, the US dollar is weakening as investors assess developments in the Iran war and the strong likelihood of a new round of negotiations between the United States and Iran in Pakistan aimed at ending the ongoing conflict in the Middle East.

Federal Reserve Chair Jerome Powell is scheduled to speak later today, with his remarks expected to provide new clues about the path of US interest rates over the course of this year, especially after the recent rise in oil prices amid the impact of the Iran war.

European interest rates

ECB President Christine Lagarde said last week that the bank is ready to raise interest rates even if the expected rise in inflation is temporary.

Following those comments, money markets increased pricing for a 25-basis-point rate hike by the European Central Bank at the April meeting from 25% to 35%.

Sources told Reuters that the European Central Bank is likely to begin discussing interest rate hikes next month.

To reassess these expectations, investors are awaiting the release of Germany’s March inflation data later today.

Euro outlook

We at Economies.com expect that if Germany’s inflation data comes in more hawkish than market expectations, the likelihood of European interest rate hikes this year will increase, leading to further recovery in the euro’s exchange rate against a basket of global currencies.