The US Dollar (USD) continued to trade under pressure on Thursday, extending its recent losses and briefly touching multi-day lows before rebounding to challenge the 101.00 region on the US Dollar Index (DXY) [1]. The weakness in the USD was attributed to divisions among Federal Reserve (Fed) policymakers, as revealed in the latest FOMC Meeting Minutes. Some Fed officials expect the policy rate to remain near its current 3.6% level by year-end, while others see the possibility of an additional rate hike, creating uncertainty over the future path of US monetary policy [2]. This policy ambiguity has weighed on the Greenback, despite resilient US economic data, including a drop in Initial Jobless Claims to 215,000 for the week ending July 4, down from 217,000 previously, and a slight increase in Continuing Jobless Claims to 1.814 million [2].
Geopolitical tensions, particularly between the United States and Iran, have also influenced market sentiment. Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned that further US military action would prompt retaliation and reiterated Iran's control over the Strait of Hormuz [2]. These tensions have fueled concerns over energy-driven inflation and reinforced expectations that the Fed could maintain a restrictive policy stance for longer. According to the CME FedWatch tool, the probability of a rate hike at the next Fed meeting has risen to over 30%, up from less than 20% a week ago [2].
Currency markets reflected these developments, with the Swiss Franc (CHF) extending its gains for a second consecutive day, trading around 0.8065 against the USD and appreciating by 0.15% on Thursday [2]. The CHF benefited from its safe-haven appeal amid rising inflation concerns and geopolitical risks. The Swiss National Bank (SNB) reiterated its readiness to intervene in the foreign exchange market to prevent excessive appreciation of the Swiss Franc and limit imported inflation [2]. The CHF was the strongest against the US Dollar among major currencies, as shown in the percentage change table, with the USD/CHF pair declining by 0.27% [2].
Other major currency pairs also saw notable moves. EUR/USD posted its second consecutive daily advance but faced resistance near 1.1450, while GBP/USD retreated from three-week highs around 1.3430 to test the 1.3400 level [1]. USD/JPY's recovery stalled amid renewed downside pressure on the USD and ongoing concerns about FX intervention [1]. Commodity markets saw WTI crude oil reverse five days of gains to fall back to $72.00 per barrel, and gold prices rebounded above $4,100 per troy ounce, supported by USD weakness and geopolitical jitters [1].
Looking ahead, key data releases include US Consumer Price Index (CPI) figures and the Canadian labour market report on July 14, as well as final inflation data in Germany and a speech by ECB’s Vujcic [1]. In Australia, Westpac's Consumer Confidence gauge is also scheduled for release [1].
CONCLUSION
The US Dollar remains under pressure due to Fed policy uncertainty and escalating geopolitical tensions, while the Swiss Franc has strengthened on safe-haven demand. Market participants are closely watching upcoming inflation data and central bank communications for further direction. The current environment suggests heightened volatility and a cautious outlook for the USD.