US FX WRAP: Dollar weighed by reports US & Iran near deal; CAD & NOK lag on lower oil prices
The dollar was broadly lower as geopolitical reporting pointed towards the US and Iran nearing a deal to end the war. USD tracked oil lower, on two main updates. US President Trump announced that Project Freedom will be paused for a short period to see whether or not the agreement with Iran can be finalised and signed, and Axios reported that US and Iran are reportedly closing in on a one-page memo to end the war. That said, Iranian media, via sources, downplayed the Axios report; the US blockade remains, a gap remains on the nuclear issue, and Iran's response still awaits, all of which casts doubts on a deal being finalised. Separate from geopolitics, ADP showed 109k private jobs added to the economy above the expected 79k, ahead of the NFP report on Friday. Fed 2028 voter, Musalem, noted that plausible scenarios at this point could lead to both rate cuts and rate hikes. Attention on the Trump meeting with Chinese President Xi on 14-15th this month, in which Trump said today a deal with Iran may be reached before then, but later said that there is never a deadline on Iran, but a deal will be done. DXY troughed at 97.625 before bouncing alongside the oil move to just above 98.00.
CAD and NOK weakened against USD, dragged down by the slump in oil prices, which slumped on geopolitical optimism. USD/CAD rose marginally to ~1.3635 despite the Canada Ivey PMI rising to 57.7 (exp. 49.9), its highest level in seven months.
NZD rallied the most amongst G10 FX as risk sentiment, while USD/JPY hit lows of 155.03, beneath last week's low of 155.56 in the wake of the JPY intervention. Continued sharp drawdowns have been seen; however, no confirmation of further invention has been issued. USD/JPY trimmed some of the swift downside, now trading around 156.37.
The US dollar is facing downward pressure due to reports of a potential US-Iran deal, which, if finalized, could ease geopolitical tensions and stabilize oil prices. However, skepticism remains about the actualization of such an agreement, given persistent issues like the US blockade and nuclear negotiations. Concurrently, CAD and NOK are being weighed down by lower oil prices, reflecting the interconnectedness of geopolitical developments and commodity prices on currency valuations.