Today’s markets analysis on behalf of Joseph Dahrieh, Managing Director at Tickmill
The dollar was broadly stable on Tuesday, maintaining a firm tone as geopolitical tensions in the Middle East continue to dominate market dynamics. The approaching deadline set by President Donald Trump for Iran has kept investors on edge, reinforcing demand for the dollar as a preferred safe-haven asset.
Ongoing geopolitical tensions and uncertainty around the reopening of the Strait of Hormuz have sustained elevated energy prices, supporting yields and the currency. Treasury yields edged higher across maturities amid increasing inflationary pressures tied to energy markets. The rise in yields underpinned the dollar, despite mixed domestic data.
On the macro front, the latest ISM Services report introduced a note of caution. While the index remains in expansion territory, the unexpected decline and contraction in the employment component suggest that parts of the economy may be losing momentum. This softening could affect the Federal Reserve’s outlook. A pause in interest rates is expected in the near term, with limited expectations for monetary policy changes this year.
Attention now shifts to today’s durable goods orders and job market data in addition to this week’s inflation data and FOMC minutes. These reports could tilt monetary policy expectation one way or the other and inject volatility into the foreign exchange and bond markets.
