The US dollar was stable on Tuesday as markets assessed the diplomatic situation in the Middle East and positioned ahead of a heavy week of labour market releases.
Geopolitical uncertainty continued to provide the currency with some underlying support. While US President Donald Trump affirmed that discussions with Tehran were underway, Iranian officials denied that there were any talks with the US.
This discrepancy in messaging could sustain safe-haven demand and keep oil prices supported, feeding inflation concerns.
The Federal Reserve is expected to raise interest rates at the next FOMC meeting, which could leave the dollar and yields supported. However, another hold is still priced at a 37% probability.
Economic data also provided support. The ISM Manufacturing PMI climbed to 55.6 in July, the strongest expansion since May 2022, with output growing at the fastest pace since November 2021 and the employment component returning to expansion for the first time since January 2025.
Attention now turns to today’s JOLTS job openings, which follow an earlier reading that surpassed expectations and was the highest since May 2024. This comes ahead of Friday’s July payrolls report. Resilient labour demand could support the prospect of an interest rate hike at the next meeting and support elevated yields, while mounting odds of another hold could limit the dollar’s upside.
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