US dollar declines after Israel-Iran ceasefire and drop in oil prices
The US dollar fell on Tuesday after US President Donald Trump announced a ceasefire agreement between Israel and Iran, boosting risk appetite and tanking oil prices.
Trump announced the full ceasefire, ending a 12-day conflict that led to the displacement of millions of people from Tehran.
Israel agreed to the US proposal, noting it has achieved its goal of destroying Iranian nuclear and missile targets.
Yen and Euro Rally
Both the yen and euro benefited sharply from the decline in oil prices, as both Japan and the EU rely heavily on oil and natural gas imports.
The dollar fell 0.75% today against the yen to 145.03, while the euro rose 0.27% to 1.1609, approaching October 2021 highs at 1.1632.
The dollar faced more pressure after bearish statements from Fed official Michelle Bowman, which opened the door for a rate cut soon.
Fed Governor Christopher Waller also said a rate cut could be studied at next month’s meeting.
Trump once again called for rate cuts ranging between 3 and 3 percentage points.
Markets are now pricing a 23% chance of a Fed rate cut in July, up from 14.5% in the previous day, according to the Fedwatch tool.
Dollar Performance
The dollar index fell 0.14% against a basket of major rivals to 98.09.
The Australian dollar surged 0.7% to $0.6506, while the New Zealand dollar added 0.75% to $0.6025.
Israel’s Shekel spiked 1.5% against the dollar to February 2023 highs.
A dollar’s decline was long anticipated after an over 50% surge in its value in 2025 compared to its lows in the global financial crisis.
Trump’s chaotic tariff campaign hurt the appeal of US assets, and sent the dollar 10% lower in just a few months.
Investors are worried about a weaker investment environment in the US and a stubborn government deficit that’s now reaching 7% of total GDP, which threatens the US credit rating.
Gold plumbs two-week trough before Powell's testimony
Gold prices fell in European trade on Tuesday to a two-week trough as the risk appetite improved in the markets after US President Donald Trump announced an Israel-Iran ceasefire, weakening haven demand.
Later today, Fed Chair Jerome Powell is scheduled to testify ahead of the House of Parliament in Washington.
Prices
Gold prices fell 1.55% today to $3316 an ounce, the lowest since June 11, with a session-high at $3370.
On Monday, gold prices were little changed despite riveting developments in the Middle East.
Ceasefire
US President Donald Trump announced a ceasefire agreement between Iran and Israel, to get into effect in a few hours.
The deal, reached with Qatari help and US coordination, stipulates an Iranian ceasefire first, followed by Israel in 12 hours, then the announcement of the end of the 12-day war in 24 hours.
Trump lauded the agreement which avoided a war that would’ve destroyed the Middle East.
US Rates
Fed official Michelle Bowman said on Monday that the time for an interest rate cut is approaching amid potential risks to the labor market.
The odds of a Fed 0.25% rate cut at the July meeting rose from 15% to 23% according to the Fedwatch tool.
The odds of a Fed September rate cut rose from 68% to 78%.
SPDR
Gold holdings at the SPDR Gold Trust rose 7.16 tons yesterday to a total of 957.4 tons, the highest since September 2022.
Euro approaches 4-year peak after Israel-Iran ceasefire
The euro rose in European trade on Tuesday against a basket of major rivals, expanding the gains for the fourth straight session against the dollar and approaching a four-year peak as the risk appetite improved in the markets with the US dollar dropping after an Israel-Iran ceasefire agreement.
The odds of an ECB interest rate cut in July also dropped as investors await more clues on the path ahead of European policy easing in the second half of the year.
The Price
The EUR/USD price rose 0.35% today to $1.1614, with a session-low at $1.1574.
The euro closed up 0.5% on Monday, the third profit in a row, approaching a four-year peak at $1.1631.
Ceasefire
US President Donald Trump announced a ceasefire agreement between Iran and Israel, to get into effect in a few hours.
The deal, reached with Qatari help and US coordination, stipulates an Iranian ceasefire first, followed by Israel in 12 hours, then the announcement of the end of the 12-day war in 24 hours.
Trump lauded the agreement which avoided a war that would’ve destroyed the Middle East.
US Dollar
The dollar index fell 0.3% on Tuesday away from a four-week high at 99.42 against a basket of major rivals.
The dollar fell as the risk appetite improved in most global markets following the Iran-Israel ceasefire.
Later today, Fed Chair Jerome Powell is scheduled to testify ahead of the House of Parliament in Washington.
European Rates
ECB President Christine Lagarde hinted at the possible end of the current cycle of policy easing, which was in response to a combined shock such as the Covid 19 pandemic, the Ukrainian war, and the energy crisis.
According to a Reuters source, most ECB members now aim at holding interest rates unchanged in July, with the global markets now expecting just an additional 25 basis points of rate cuts by the end of the year.
The odds of a 0.25% ECB rate cut in July now stood below 30%, with traders awaiting more eurozone data and remarks by ECB officials to gather more clues.
Yen climbs after Trump's announcement of an Iran-Israel ceasefire
The yen gained ground in Asian trade on Tuesday on track for the first profit in four days against the dollar and moving away from recent six-week lows.
The dollar is expanding its losses in the forex market as the risk appetite rebounded after US President Donald Trump’s announcement of a ceasefire between Israel and Iran.
The cautious Bank of Japan’s policy meeting last week also hurt the odds of normalizing the monetary policy and hiking interest rates in July, as traders now await more data from the world’s third largest economy.
The Price
The USD/JPY price fell 0.6% today to 145.29, with a session-high at 146.17.
The yen lost 0.1% on Monday against the greenback, hitting a six-week trough at 148.03 amid mounting geopolitical tensions back then.
Ceasefire
US President Donald Trump announced a ceasefire agreement between Iran and Israel, to get into effect in a few hours.
The deal, reached with Qatari help and US coordination, stipulates an Iranian ceasefire first, followed by Israel in 12 hours, then the announcement of the end of the 12-day war in 24 hours.
Trump lauded the agreement which avoided a war that would’ve destroyed the Middle East.
US Dollar
The dollar index fell 0.3% on Tuesday away from a four-week high at 99.42 against a basket of major rivals.
The dollar fell as the risk appetite improved in most global markets following the Iran-Israel ceasefire.
Later today, Fed Chair Jerome Powell is scheduled to testify ahead of the House of Parliament in Washington.
Japanese Rates
The odds of a Bank of Japan 0.25% interest rate hike in July is still below 40%.
Now investors await more inflation, unemployment, and wages data from Japan.