- US Dollar Index softens to around 99.50 in Wednesday’s Asian session.
- A US-Iran peace deal will be signed at Switzerland’s mountainside Burgenstock resort on Friday.
- Fed is expected to leave its benchmark interest rate unchanged at a target range of 3.50% to 3.75% at the June meeting.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 99.50 during the Asian trading hours on Wednesday. The DXY extends the decline amid optimism surrounding a potential US-Iran peace deal. The US Federal Reserve (Fed) interest rate decision will take center stage later on Wednesday.
US Vice President JD Vance said on Tuesday that US President Donald Trump may decide to release a preliminary deal to end the war with Iran before Friday, after the US president said the agreement had already been signed. Trump stated that the Strait of Hormuz will be open by Friday and that the full text of the peace deal will be released in a “formal setting.”
The Swiss foreign ministry confirmed that a US-Iran deal aimed at ending the Middle East war will be signed at Switzerland’s mountainside Burgenstock resort on Friday. Hopes of a peace agreement between the US and Iran could undermine a safe-haven currency such as the US Dollar against its rivals.
The Fed is due to announce its next policy decision on Wednesday. Economists expect the US central bank to keep its benchmark rate in a range of 3.50% to 3.75% as it waits to see how the war’s energy-price shock ripples through the economy.
The focus will be on new Fed Chairman Kevin Warsh and the handling of the press conference that follows the interest rate decision. Any hawkish comments from Fed officials could lift the DXY in the near term.
Markets are now pricing in nearly a 64% chance of a US central bank interest rate hike in December this year after the peace deal, down from 69% last week, according to the CME FedWatch tool.
