Dollar Rises as Iran War Continues

Currency Market Overview - The dollar index (DXY) reached a 10.5-month high, increasing by 0.40% due to safe-haven demand amid concerns over a prolonged conflict in Iran [1] - The euro fell to a 1-week low, down by 0.45%, pressured by a stronger dollar and negative economic sentiment in the Eurozone [5][6] - The USD/JPY decreased by 0.40%, with the yen recovering from a 1.75-year low as Japanese officials hinted at potential intervention in foreign exchange markets [7] Economic Indicators - The US Dallas Fed manufacturing activity survey declined by 0.4 to -0.2, falling short of expectations for an increase to 2.0 [2] - The Eurozone's economic sentiment index dropped by 1.6 to a 6-month low of 96.6, weaker than the anticipated 96.7 [6] - German CPI rose by 1.2% month-on-month and 2.8% year-on-year, marking the largest annual increase in two years, which may influence ECB policy [6] Central Bank Insights - Fed Chair Powell stated that inflation expectations are stable and the FOMC aims for a 2% inflation target, but the economic impact of the Iran conflict remains uncertain [3] - The FOMC is expected to cut interest rates by at least 25 basis points in 2026, while the BOJ and ECB are projected to raise rates by at least 25 basis points in the same year [4] - Swaps markets indicate a 52% chance of a 25 basis point rate hike by the ECB at the upcoming policy meeting [6]