FX.co ★ Dollar Heads for Weekly Gain Amid Middle East Tensions

The US dollar index slightly declined to approximately 98.6 on Friday but continued to trend toward a weekly increase. This movement is driven by heightened demand for safe-haven assets amid the ongoing conflict between Israel and Iran, coupled with potential US involvement. Reports suggest that President Donald Trump has extended a final opportunity for Iran to negotiate an end to its nuclear program, temporarily holding off on any military actions for up to two weeks.

Regarding monetary policy, the Federal Reserve held interest rates steady earlier this week, adopting a cautious and data-driven stance amidst growing economic and geopolitical tensions. Fed Chair Jerome Powell cautioned that inflation might accelerate in the coming months, partly due to the inflationary impact of Trump’s tariffs. Additionally, the Fed revised down its economic growth projections and reiterated expectations for two 25 basis-point rate reductions in 2025. Traders are now anticipating the Philadelphia Fed's manufacturing survey and the Conference Board's leading economic indicators release on Friday.