The US dollar traded little changed on Monday after posting a modest weekly loss, as investors awaited developments in Middle East peace talks and this week’s US employment data, which could influence the future path of Federal Reserve policy.

The dollar index, which measures the US currency against a basket of six major currencies, declined last week amid expectations that the United States and Iran were moving closer to an agreement that could lead to the reopening of the Strait of Hormuz.

The closure of the key oil shipping route drove energy prices higher and worsened inflation expectations, prompting some traders to increase bets on a Federal Reserve interest rate hike later this year.

However, with no new signs of progress in the negotiations and renewed tensions between the United States and Iran over the weekend, currency markets have shifted into a wait-and-see mode.

“We are waiting to see progress in one direction or the other,” said Tommy von Brömsen, FX strategist at Handelsbanken.

He added that reopening the Strait of Hormuz and a decline in oil prices could weaken the dollar in the short term, while risk-sensitive currencies such as the Swedish krona would likely benefit.

The dollar initially gained support during the conflict due to safe-haven demand and the relatively limited impact of higher energy prices on the US economy. However, it has since surrendered part of those gains amid uncertainty surrounding the future of the conflict.

The dollar index was little changed at around 99.02 after declining 0.4% last week.

Meanwhile, the euro edged down to $1.1652, while the British pound rose 0.1% to $1.3460.

Focus shifts to the Federal Reserve

Markets are now betting that the Federal Reserve’s next move will be an interest rate hike, reversing expectations that had pointed to rate cuts before the outbreak of the Iran conflict.

The shift reflects higher energy prices and their potential impact on inflation, as well as the continued strength of the US labor market.

The US nonfarm payrolls report is due on June 5. Economists surveyed by Reuters expect the unemployment rate to remain at 4.3% and for the economy to add approximately 85,000 jobs.

In a related development, Jerome Powell, whose term as Federal Reserve Chair officially ended on May 15 but who remains a member of the Board of Governors, warned against the politicization of monetary policy.

In remarks delivered on Sunday, Powell said one reason he chose to remain on the Board was what he views as ongoing threats to the independence of the US central bank.

Several Federal Reserve officials are scheduled to speak this week, including Beth Hammack, Lorie Logan, and Mary Daly.

The Japanese yen under scrutiny

Investors are also awaiting a speech from Bank of Japan Governor Kazuo Ueda on Wednesday for clues on whether the central bank intends to proceed with an interest rate hike at its next meeting.

Although there is no full consensus within the Bank of Japan regarding the decision, sources familiar with the matter indicated that pausing the reduction of government bond purchases is gaining support among policymakers.

The Japanese yen slipped 0.1% to ¥159.45 per dollar, remaining close to the ¥160 level that previously prompted Japanese authorities to intervene in the foreign exchange market to support the currency.

“¥160 appears to be the red line for Japanese authorities,” von Brömsen said.

“I believe we will see another intervention if we approach that level again.”

The Australian dollar was little changed at $0.7179, while the New Zealand dollar fell 0.4% to $0.5969.

Gold prices fell by more than 1% in European trading on Monday, retreating from a two-week high and heading toward their first loss in three sessions, amid profit-taking and corrective selling pressure. The precious metal also came under pressure from a stronger US dollar and rising oil prices as a new wave of military strikes was exchanged between the United States and Iran.

The latest round of attacks comes as Washington and Tehran continue negotiations aimed at ending the three-month conflict, with US President Donald Trump seeking stricter conditions related to Iran’s nuclear program.

Higher oil prices have revived inflation concerns, increasing pressure on Federal Reserve policymakers and boosting expectations for a US interest rate hike later this year, pending additional economic data and comments from Fed officials.

Price Overview

• Gold prices today: Spot gold fell 1.1% to $4,490.64 per ounce, down from the opening level of $4,540.17, after reaching an intraday high of $4,546.05.

• At Friday’s settlement, gold gained 0.95%, marking its second consecutive daily advance and reaching a two-week high of $4,595.33 per ounce, supported by progress in peace negotiations between the United States and Iran.

• Gold lost approximately 1.8% during May, recording its third consecutive monthly decline due to weaker investment demand amid rising global government bond yields.

US dollar

The dollar index rose 0.15% on Monday as part of a recovery from a two-week low, reflecting renewed strength in the US currency against a basket of global currencies.

The advance comes amid heightened caution and reduced risk appetite after the United States and Iran exchanged a new round of military strikes while continuing intensive negotiations aimed at ending the war and reopening the Strait of Hormuz, one of the world’s most important energy trade routes.

Global oil prices

Oil prices jumped more than 3% on Monday, recovering from five-week lows as military tensions escalated in the Strait of Hormuz, while Israel expanded its offensive in Lebanon, reducing hopes for a ceasefire across the Middle East.

Latest developments in the Iranian war

• The United States announced strikes on Iranian military sites, and Tehran responded with an attack on an air base.

• The US military said it destroyed Iranian air defense systems, a ground control station, and two drones.

• Iran’s Revolutionary Guard announced that it had retaliated by launching an attack on a US air base.

• Reports indicated that Kuwaiti air defenses intercepted missiles and drone attacks.

• The United States and Iran remain without an agreement to end the war after Trump stated that he is not in a hurry to finalize a deal.

• The US president returned the proposed agreement draft with Iran to include “stricter” conditions related to the nuclear file, extending negotiations for several additional days.

• Donald Trump said on Friday that he would make a decision soon regarding the proposed agreement to extend the ceasefire with Iran.

• The mechanism for releasing frozen Iranian assets abroad remains one of the most complex points of disagreement between Washington and Tehran.

• Iranian Foreign Minister Abbas Araghchi confirmed that messages continue to be exchanged with Washington, noting that the success of the talks will ultimately be judged by their final outcome and whether the rights of the Iranian people are preserved.

US interest rates

• Federal Reserve Vice Chair for Supervision Michelle Bowman said on Friday that the consequences of the Middle East conflict could generate more persistent inflationary pressures, potentially requiring a reassessment of the future path of US monetary policy.

• According to the CME FedWatch Tool, market pricing for a Federal Reserve rate hike in December increased from 47% to 53%.

• Markets continue to price a 99% probability that interest rates will remain unchanged at the June meeting, while the probability of a 25-basis-point rate hike stands at 1%.

• To reassess those expectations, investors are closely monitoring upcoming US economic data releases and comments from Federal Reserve officials.

Gold outlook

Ricardo Evangelista, analyst at ActivTrades, said: “The optimism surrounding US-Iran negotiations to end the confrontation in the Strait of Hormuz faded over the weekend. As a result, oil prices rebounded, reviving inflation concerns and reinforcing the Federal Reserve’s hawkish outlook.”

Evangelista added: “Traders will be closely watching this week’s key economic data releases, as they could reshape expectations regarding the future path of Federal Reserve policy, influencing demand for the US dollar and, consequently, gold prices.”

SPDR Gold Trust

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, declined by 3.42 metric tons on Friday, marking a second consecutive daily decrease. Total holdings fell to 1,029.14 metric tons, the lowest level since October 15, 2025.

The euro weakened in European trading on Monday against a basket of global currencies, pulling back from a two-week high against the US dollar and heading toward its first loss in three sessions, as profit-taking and corrective selling emerged amid a cautious mood across global markets ahead of developments in ongoing peace negotiations between the United States and Iran.

Following media reports and rising global oil prices, expectations for a European Central Bank interest rate hike at this month's meeting have increased. Investors are now awaiting the release of the Eurozone’s key inflation data for May on Tuesday to reassess those expectations.

Price Overview

• Euro exchange rate today: The euro fell about 0.15% against the dollar to $1.1642, from an opening level of $1.1658, after reaching an intraday high of $1.1659.

• The euro ended Friday up about 0.1% against the dollar, marking its second consecutive daily gain and reaching a two-week high of $1.1686 amid easing military tensions between the United States and Iran in the Strait of Hormuz.

• During May, the euro lost 0.65% against the US dollar, recording its third monthly decline in the past four months due to risk aversion and rising US Treasury yields.

US dollar

The dollar index rose 0.15% on Monday as part of a recovery from a two-week low, reflecting renewed strength in the US currency against a basket of major and minor currencies.

The advance comes amid cautious market sentiment and reduced risk-taking as investors await the outcome of negotiations between the United States and Iran regarding an end to the war and the reopening of the Strait of Hormuz, one of the world's most important energy trade routes.

Global oil prices

Oil prices jumped more than 2% on Monday, rebounding from five-week lows as Israel expanded its offensive in Lebanon, reducing hopes for a ceasefire in the Middle East.

Latest developments in the Iranian war

• The United States and Iran remain without an agreement to end the war after Trump stated that he is not in a hurry to finalize a deal.

• The US president returned the proposed agreement draft with Iran to include “stricter” conditions related to the nuclear file, extending negotiations for several additional days.

• Donald Trump said on Friday that he would make a decision soon regarding the proposed agreement to extend the ceasefire with Iran.

• The mechanism for releasing frozen Iranian assets abroad remains one of the most complex points of disagreement between Washington and Tehran.

• Iranian Foreign Minister Abbas Araghchi confirmed that messages continue to be exchanged with Washington, noting that the success of the talks will ultimately be judged by their final outcome and whether the rights of the Iranian people are preserved.

European interest rates

• Sources told Reuters that the European Central Bank is highly likely to raise interest rates in June due to inflation expectations moving toward an undesirable scenario.

• Amid the rebound in global oil prices, money markets increased the probability of a 25-basis-point ECB rate hike in June from 55% to 65%.

• To reassess those expectations, investors are awaiting the release of the Eurozone’s key inflation data for May on Tuesday.

The Japanese yen weakened in Asian trading on Monday against a basket of major and minor currencies, moving into negative territory against the US dollar and approaching its lowest level in four weeks, as caution and uncertainty dominate global markets ahead of further developments in peace negotiations between the United States and Iran.

Investors are also awaiting the Bank of Japan’s policy meeting later this month, when policymakers will reassess monetary tools and decide on interest rates amid differing views within the policy board regarding the central bank’s next move.

Price Overview

• Japanese yen exchange rate today: The dollar rose about 0.2% against the yen to ¥159.50, from Friday’s closing level of ¥159.23, and recorded an intraday low of ¥159.30.

• The yen ended Friday’s trading virtually unchanged against the dollar after gaining 0.2% in the previous session as part of a recovery from a four-week low of ¥159.65.

• During May, the yen lost 1.7% against the US dollar, marking its third monthly decline in the past four months, largely due to higher US Treasury yields.

US dollar

The dollar index rose more than 0.1% on Monday as part of a recovery from a two-week low, reflecting renewed strength in the US currency against a basket of global currencies.

The advance comes amid cautious market sentiment and reduced risk-taking as investors await the outcome of ongoing negotiations between the United States and Iran regarding an end to the war and the reopening of the Strait of Hormuz, one of the world’s most critical energy trade routes.

Global oil prices

Oil prices jumped more than 2% on Monday, rebounding from five-week lows as Israel expanded its offensive in Lebanon, reducing hopes for a ceasefire in the Middle East.

Latest developments in the Iranian war

• The United States and Iran remain without an agreement to end the war after Trump stated that he is not in a hurry to finalize a deal.

• The US president returned the proposed agreement draft with Iran to include “stricter” conditions related to the nuclear file, extending negotiations for several additional days.

• Donald Trump said on Friday that he would make a decision soon regarding the proposed agreement to extend the ceasefire with Iran.

• The mechanism for releasing frozen Iranian assets abroad remains one of the most complex points of disagreement between Washington and Tehran.

• Iranian Foreign Minister Abbas Araghchi confirmed that messages continue to be exchanged with Washington, noting that the success of the talks will ultimately be judged by their final outcome and whether the rights of the Iranian people are preserved.

Japanese interest rates

• The Bank of Japan will meet on June 15-16 to assess monetary policy options appropriate for developments in the world’s fourth-largest economy.

• Market pricing for a quarter-point interest rate increase at the June meeting currently stands at around 60%.

• Markets are eagerly awaiting a speech by Bank of Japan Governor Kazuo Ueda on Wednesday for clues on whether the central bank intends to proceed with a rate hike in June.

• Investors are also awaiting additional data on inflation, unemployment, and wages in Japan to reassess those expectations.

The ¥160 threshold

Japanese authorities continue to closely monitor movements in the local currency, particularly as the yen weakens toward the critical ¥160-per-dollar level, which has long been viewed as a threshold that could trigger renewed intervention in the foreign exchange market.

Reuters sources previously reported that Tokyo intervened several times in late April and early May to halt the yen’s decline, although the currency’s recovery proved short-lived. At the time, the exchange rate reached ¥159.25 per dollar, its weakest level since April 30.