The US Dollar (USD) extended its recovery on Tuesday, reaching new multi-week highs, driven by persistent expectations of additional Federal Reserve tightening. The US Dollar Index (DXY) climbed further above the psychological 100.00 barrier, marking new two-month tops, even as US Treasury yields displayed a mixed tone across the curve [1]. Despite increasing hopes for a potential deal to resolve the US-Iran-Hormuz conflict, market participants appeared to disregard these geopolitical developments [1].
Key currency pairs reflected the USD's strength. EUR/USD experienced additional selling pressure, dropping to fresh multi-week lows near 1.1430, while GBP/USD retreated to levels last seen in late July, around 1.3320, amid robust sentiment for the Greenback. USD/JPY posted gains for the third consecutive day, remaining above the 157.00 level, and AUD/USD briefly broke below the 0.7100 support, hitting three-day troughs [1].
The market's focus is now on the release of the preliminary S&P Global Manufacturing and Services PMIs for September, which are expected to provide further direction. Other notable events include the weekly MBA Mortgage Applications, the EIA’s weekly US crude oil inventories report, and speeches by Fed’s Barr and ECB’s Vujcic and Lane [1].
In commodities, front-month WTI crude futures fell below the key $90.00 per barrel mark, reaching fresh three-week lows, influenced by renewed optimism for a reopening of the Strait of Hormuz. Gold reversed its earlier losses and posted modest gains, though it remained below the $4,400 per troy ounce threshold, despite the firmer USD and mixed Treasury yields [1].
CONCLUSION
The US Dollar's advance to multi-week highs underscores strong market expectations for further Fed tightening, overshadowing geopolitical optimism regarding the US-Iran-Hormuz situation. Key upcoming economic data, including advanced PMIs, are likely to set the tone for the next market moves. Commodity prices, particularly oil and gold, reflected the prevailing currency and geopolitical dynamics.