The dollar index was under pressure on Wednesday as geopolitical fears abated amid calmer conditions in the Middle East.
Concerns about new incidents retreated after President Donald Trump signaled a temporary pause in naval operations around the Strait of Hormuz.
Additional comments from Marco Rubio, suggesting that Washington had achieved its objectives in Operation Fury, further reinforced hopes for de-escalation, weighing on the demand for the US dollar as a safe-haven.
At the same time, easing oil prices could help moderate inflation concerns and push Treasury yields down.
Recent economic data painted a mixed picture of the US economy. Job openings declined in March, although the reading remained slightly above expectations, suggesting labor demand is cooling. Meanwhile, the latest ISM Services PMI eased modestly and came in just below forecasts, pointing to some moderation in business activity. The latter could also affect monetary policy expectations if the trend continues.
The US currency could also remain at risk amid interventions from the Japanese government to support the yen. Attention now shifts toward upcoming labor market data. Today’s ADP report will serve as an indicator ahead of Friday’s non-farm payrolls release, which could significantly influence expectations for interest rates, yields, and the dollar.
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