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[MARKET ANALYSIS] Greenback knocked by US/Iran optimism ahead of Trump deadline, Fed speak ahead

The optimism surrounding US/Iran negotiations appears to be boosting risk sentiment in the FX market, leading to a notable decline in the DXY.

Newsquawk StaffPublished On the live feed at — 6 more headlines followed before this page went public
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Report says ballistic missiles destroyed Israeli-linked container ship and another vessel carrying military equipment was struck and disabled after avoiding the Strait of Hormuz via the UAE’s Khorfakan port, Mehr News reports

Republicans are reportedly weighing how broadly to structure a party-line bill to fund President Trump’s immigration enforcement, with some senators seeking multi-year DHS funding and others favouring a narrower ICE and CBP measure, Semafor reports

[MARKET ANALYSIS] Greenback knocked by US/Iran optimism ahead of Trump deadline, Fed speak ahead

Fars reports that Iranian retaliatory attacks targeted two petrochemical complexes in Saudi Arabia linked to American companies, including Exxon (XOM)

Iran spokesman for the National Security and Foreign Policy Committee of the Shura Council says Iran will not allow any enemy ship to cross the Strait of Hormuz, Al Mayadeen reports

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  • FX markets saw a sharp risk-on move in the European morning, with no specific headline, but several outlets reporting optimism in US/Iran negotiations ahead of Tuesday's deadline. DXY fell as much as 0.2% from 100.04 to a trough of 99.77, and high-beta FX was helped against the weaker buck, with Aussie the outperformer and Sterling also performing notably well.
  • Some participants flagged an Axios article six hours before the move, which quoted a US official, "If the president sees a deal is coming together, he'll probably hold off..." it is unclear whether this led to the reaction, though other reports following this initial move have added to the constructive risk environment, "mediators are close to reaching an agreement" on a "framework of understanding for ceasefire", according to Pakistani reporter Anas Mallick.
  • Elsewhere, EUR and GBP were unreactive to mixed European Final PMIs. To recap, the EZ wide composite and services were revised a touch higher while the UK's were revised lower.
  • The session ahead sees US ADP Employment Change Weekly, US Durable Goods RCM/TIPP Economic Optimism Index (Apr), Atlanta Fed GDP and President Trump's Iran deadline. Fed speak is expected from Fed's Williams (13:30 BST), Goolsbee (17:35 BST) and Jefferson (22:50 BST). Full primer on the Newsquawk headline feed.
Context

This shift suggests traders are positioning themselves ahead of potential developments related to Trump's deadline, which could have significant implications for the dollar and related asset classes, especially if a deal materializes. Keep an eye on upcoming Fed comments which could further influence currency movements today.

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