FX.co ★ Dollar Pulls Back After Early Gains

On Monday, the dollar index relinquished its initial gains, dipping slightly below 99 as apprehensions regarding an imminent Iranian retaliation to U.S. airstrikes and the possible closure of the Strait of Hormuz began to subside. Consequently, the initial rise in oil prices was reversed, alleviating concerns of reignited inflationary pressures. Concurrently, Federal Reserve Governor Michelle Bowman suggested she might endorse a rate reduction in July should inflation remain tepid, mirroring the dovish sentiment expressed by Governor Christopher Waller. In light of this, traders have heightened their expectations for monetary easing, now forecasting roughly 55 basis points in rate cuts by year-end. Investors are also directing their attention to Fed Chair Jerome Powell's imminent semi-annual monetary policy testimony before Congress, seeking further clarity on the Fed's perspective. On the economic data front, the preliminary PMIs surpassed forecasts, with continued expansion observed in both the manufacturing and services sectors, although indications of mounting price pressures were evident.