US dollar holds steady as geopolitical concerns persist

The US dollar remained broadly stable as investors balanced safe-haven demand against moderating expectations for Federal Reserve tightening.

Ongoing geopolitical tensions in the Middle East continued to underpin demand for safe-haven assets, helping the greenback maintain support as markets remained cautious over the risk of further regional escalation.

Meanwhile, US Treasury yields eased after oil prices stabilised following their gains earlier this week, reducing immediate inflation concerns.

While this week’s weaker-than-expected US inflation data prompted markets to scale back expectations for monetary tightening, the Federal Reserve is still widely expected to deliver one interest rate hike before the end of the year.

This outlook should continue to provide some underlying support for both Treasury yields and the US dollar, although any further easing in rate expectations could weigh on both.

Looking ahead, today’s US economic releases, including consumer sentiment and industrial production, could influence short-term market sentiment. Attention will then shift to next week’s labour market data, which could further shape the interest rate outlook. As the next Federal Reserve meeting approaches at the end of the month, incoming economic data and geopolitical developments are likely to remain the primary drivers of the dollar’s direction.