The dollar index was little changed around 99 on Wednesday, holding near its highest levels since April as investors remained focused on developments in the Middle East. Growing expectations that the US and Iran may be closer than ever to a deal to end the conflict and reopen the Strait of Hormuz weighed on oil prices, easing worries about another potential surge in inflation.
This renewed optimism persisted despite mixed messages from Washington and Tehran and despite fresh strikes earlier in the week. Iranian state television reported details of an unofficial draft memorandum between Tehran and Washington under which the two sides would restore shipping traffic through the Strait of Hormuz, while Iran and Oman would create a joint mechanism to manage passage through the key waterway.
On the monetary policy front, interest rate futures currently imply roughly a 50% probability that the Federal Reserve will raise rates by December.
