The dollar index climbed to 101 on Monday, its highest level in more than a year, as investors returned from the long weekend and shifted their focus back to Middle East developments and the monetary policy outlook. The United States and Iran agreed on a roadmap aimed at reaching a final agreement to end their conflict within 60 days, with Iran’s foreign minister citing “progress” in the talks, a factor that helped push oil prices lower.
At the same time, markets continue to expect the Federal Reserve to raise the federal funds rate later this year, following the distinctly hawkish tone struck by new Chair Kevin Warsh last week and the Fed’s upward revisions to its inflation projections. Investor attention is now centered on this week’s PCE report, which includes the Fed’s preferred inflation gauge and is expected to offer fresh signals on underlying price pressures.
On the currency front, the dollar’s gains were most pronounced against the Japanese yen, amid growing concerns about potential intervention. By contrast, it edged slightly lower against the British pound after UK Prime Minister Keir Starmer announced his resignation.
