FX.co ★ Dollar Set for Sharp Weekly Decline

The dollar index was little changed near 99 on Friday but remained on track for a weekly loss of more than 1%. The pullback came as a two-week ceasefire between the US and Iran triggered a sharp decline in oil prices, easing worries about renewed inflationary pressures and additional interest rate hikes.

Attention now turns to diplomatic talks in Islamabad this weekend, where Vice President JD Vance is set to lead a US delegation in negotiations with Iranian officials. Market sentiment, however, stayed cautious amid ongoing Israeli airstrikes in Lebanon and continued disruptions in the Strait of Hormuz, both of which risk undermining the talks.

On the macroeconomic front, investors awaited the March CPI report, due later today, for signals on how the conflict in the Middle East has filtered through to inflation dynamics. At the same time, minutes from the Federal Open Market Committee’s March meeting showed policymakers remained concerned that the conflict could keep inflation elevated and might ultimately warrant further rate increases, even as they continued to project one rate cut this year.