Dollar falls as Middle East tensions ease with deal

Furthermore, the Strait of Hormuz shall re-open after more than three months of turbulence for oil shipping and overall, the global energy market. Pakistan played a key role in negotiations and its Prime Minister, Shehbaz Sharif announced the achievement, but the deal is not planned to be signed until Friday in Switzerland after leaders gather for the G-7 Summit in France. There is a lot of time between now and then, which is reviving some fears amongst traders that it is not over until it is over, thus markets should take caution.

Some optimism remains with Brent Crude oil prices already down by over 4.0%. U.S. President Donald Trump said there should be no tolls nor a naval blockade, declaring “Let the oil flow!” After high inflationary pressures were revealed by data last week, the relief in fuel prices is surely a relief. We shall see how it all plays into the monetary policy narrative, which will be the discussed in the highest-risk event of the week in the FOMC policy decision and press conference on Wednesday meeting presided by chairman Kevin Warsh. FX moves have been a bit limited lately, so we will monitor just how weakening an impact the end of conflict can have on the Buck as in previous announcements when a finalized deal did not materialize.

GBP

The British Pound has been enjoying a good run in the past seven days, rising by over half of a percent since. This week will also feature the Bank of England’s meeting, taking place on Thursday. Although officials are not going to be making changes to current policy, BOE governor Andrew Bailey will need to address high inflation as his press conference follows Wednesday’s releases for both Consumer as well as Producer Price Indices for May. Retail Prices will also be out then. He will also likely face inquiries about recent criticism over gilts management and after an end to quantitative easing.

JPY

The Japanese Yen is improving slightly along with other Major peers and ahead of the crucial Bank of Japan meeting tomorrow. After much talk and speculation over monetary tightening, officials including BOJ governor Kazuo Ueda have given the nod to hiking interest rates. Deputy Shinichi Uchida will be standing in place of Ueda who is currently hospitalized. Chances for tomorrow are guaranteed, so a change of heart would certainly represent a big shock to markets. Although the rise in borrowing costs is expected, some analysts doubt it will have much of an effect on improving the Yen’s value so a very “hawkish” promise to keep hiking down the line may be the only catalyst for further appreciation.