Reports from Axios indicating that the US and Iran are moving closer to a deal aimed at ending the conflict have eased Middle East tensions, leading to significant market movements. The US Dollar Index (DXY) slid near the 98.00 area, down 0.46% to 98.03, as safe-haven demand for the Greenback diminished and risk sentiment improved. This was further supported by resilient US labor market data, with ADP Employment Change showing US private employers added 109,000 jobs in April, surpassing expectations of 99,000 and improving from March’s revised 61,000 gain—the highest increase in 15 months [1][2].
Gold (XAU/USD) surged nearly 3% on Wednesday, trading at $4,681 after bouncing off daily highs of $4,723. The optimism surrounding a potential US-Iran agreement, which reportedly includes a one-page memo with 14 points and 30-day negotiations on opening the Strait of Hormuz and limiting Tehran’s nuclear program, has underpinned the yellow metal. Technical analysis suggests momentum is shifting bullish, with buyers targeting the $4,700 milestone and the Relative Strength Index (RSI) indicating further short-term upside [2].
Oil prices also reacted sharply, with West Texas Intermediate (WTI) falling more than 7% to near $94.90 per barrel, as fears of prolonged Middle East supply disruption faded. The drop in oil prices is seen as a headwind for the US Dollar due to its close correlation with the crude benchmark [1][2].
Federal Reserve officials provided forward-looking statements, with St. Louis Fed President Alberto Musalem expressing hawkish views, noting risks have shifted toward controlling inflation and suggesting rates may remain stable for some time. Chicago Fed President Austan Goolsbee commented that higher productivity could spur spending and potentially overheat the economy, implying rates might need to rise. Money markets have priced in a nearly 93% chance that the Fed will hold rates steady at the June 17 meeting, which will be the first for Trump’s nominee for Fed Chair, Kevin Warsh. For the remainder of the year, the Fed funds rate is expected to stay unchanged [2].
Major currency pairs reflected these shifts: EUR/USD elevated near 1.1750, GBP/USD held at 1.3600, USD/JPY trimmed losses near 156.40, and AUD/USD surged toward 0.7240, benefiting from stronger risk appetite. The US Dollar was strongest against the Canadian Dollar, up 0.09% [1].
CONCLUSION
Market optimism over a potential US-Iran deal has triggered a sharp rally in gold and risk-sensitive currencies, while the US Dollar and oil prices have weakened. Strong US employment data continues to support the Greenback, but dovish expectations for the Fed’s June meeting may limit further upside. Traders are closely watching upcoming US jobless claims and Fed speeches for additional direction.