The dollar index gave up early gains to turn slightly lower on Thursday, slipping below 99 to its weakest level in more than two weeks. Markets remained focused on developments in the Middle East, where a recently announced ceasefire looked increasingly fragile ahead of peace talks scheduled for Friday. Tensions persisted as Israel continued its conflict with Hezbollah in Lebanon, while Tehran accused the US of breaching the agreement. The Strait of Hormuz also remained closed.
On the data front, February PCE inflation came in exactly as expected, while Q4 GDP growth was revised down and initial jobless claims ticked higher. Investors now turn to tomorrow’s March CPI release for an early read on how the Middle East conflict is feeding through to prices. Meanwhile, minutes from the FOMC’s March meeting showed policymakers were concerned that the war could generate persistent inflation pressures that might necessitate further rate hikes, even though they still projected one rate cut this year.
