FX.co ★ Dollar Index Falls Below 99

The dollar index stayed below 99 on Wednesday, trading near a one-month low, after news of a two-week ceasefire between the United States and Iran triggered a sharp decline in oil prices. The drop in energy costs eased investor fears of an inflationary spiral and strengthened expectations that the Federal Reserve could cut interest rates later this year. Earlier in the week, markets had effectively priced out any chance of a 2024 rate cut, having previously anticipated more than two reductions before the conflict intensified. Meanwhile, minutes from the FOMC’s March meeting showed that policymakers were worried Middle East tensions could fuel persistent inflation and potentially necessitate further rate hikes, even as they continued to project one rate cut this year. Investors now look ahead to Friday’s release of US March CPI data for further insight into inflation dynamics amid the ongoing geopolitical tensions.