The US dollar stabilizes after posting a weekly decline; this week, the market focuses on the US-Iran situation and nonfarm payroll data.
- On Monday, the US Dollar Index remained stable above the 99 mark, consolidating after recording a weekly decline last week. Investors are closely monitoring progress in Middle East peace talks and the latest signals from major global central banks regarding the timing of interest rate hikes.
- Last week, the US Dollar Index edged lower, mainly influenced by market optimism that the US and Iran could reach an agreement and resume oil transport through the Strait of Hormuz. However, oil prices surged sharply during early Monday trading after Israel ordered its forces deeper into Lebanon and both the US and Iran claimed to have launched new military strikes against each other, providing some support for the dollar.
- This week, market focus will be on the US non-farm payroll report for May. Surveys show that non-farm payrolls are expected to increase by 85,000 in May, with the data to be released on June 5, while the unemployment rate is expected to remain at 4.3%. Several Federal Reserve officials have warned that if Middle East conflict intensifies the already high inflationary pressures, the Fed may have to consider raising interest rates. Currently, the financial markets widely expect the Fed’s next move will be a rate hike, possibly before year-end—a stark contrast to scenarios discussed before the war, when officials had considered cutting rates.
- Joseph Capurso, Head of Foreign Exchange at Commonwealth Bank of Australia, stated that the dollar’s movement will be heavily influenced by developments in the US-Iran situation and the non-farm payroll data. In his report, he noted that once the Strait of Hormuz reopens, oil prices are likely to gradually fall over time, and interest rate factors will once again become the main driving force for the dollar.
- On Monday, the US Institute for Supply Management (ISM) will release the May Manufacturing PMI, and the market expects the index to rise slightly from 52.7 in April to 53. In addition, several officials, including former Federal Reserve Chair Powell, will speak this week; they are expected to continue to convey a balanced stance of making the next policy decision based on data.
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