The US dollar index traded within a range on Friday after weakening in the previous session, as signs of progress in negotiations between the US and Iran reduced demand for the currency.
Markets reacted to reports that both sides had reached a tentative agreement to extend the current ceasefire and potentially restore shipping through the Strait of Hormuz, easing concerns over prolonged energy supply disruptions and the inflationary pressures associated with them.
However, caution could persist as the proposal still requires approval from President Donald Trump.
Given the unpredictable nature of negotiations in recent months, markets could remain exposed to a reversal in the case of a setback in talks. However, any further progress toward a formal agreement would likely continue to weigh on the dollar and Treasury yields.
Looking ahead, geopolitical developments are likely to remain the primary market driver. Attention will also shift to next week’s PMI surveys and labour market data, which could provide important clues on growth conditions and the future path of monetary policy.
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