FX.co ★ US Dollar Index Tests 3-Year Low

On Tuesday, the US dollar index fell below 97.9, reaching its lowest point in over three years. This decline was driven by the ongoing flow of oil in the Middle East, which eased concerns of low inflation and bolstered expectations for multiple Federal Reserve interest rate cuts this year. Although Israel and Iran reportedly conducted new strikes shortly after agreeing to a ceasefire on Tuesday, both sides avoided promising any further retaliation. This helped maintain a de-escalatory momentum following the controlled strikes between Iranian and US forces the previous day, resulting in a sharp drop in oil prices as tankers continued to pass through the Strait of Hormuz. The improved inflation outlook bolstered expectations for two rate cuts this year. Meanwhile, Federal Reserve Chair Jerome Powell highlighted that inflationary pressures stemming from tariffs were a factor in the Fed's decision not to cut rates during recent meetings. This lends support to the possibility of rate cuts if President Trump decides to ease tariffs by the July 9th deadline.