The US Dollar Index (DXY) is trading with a softer tone near the 98.10 area, as markets react to shifting headlines regarding potential peace talks between the United States and Iran. Initial optimism was sparked by reports suggesting progress toward a temporary deal that could reopen the Strait of Hormuz, but sentiment turned cautious after Iran reportedly rejected parts of the US-backed reopening framework, leaving major disagreements unresolved on maritime access, sanctions relief, and broader security conditions [1]. Meanwhile, the US Dollar was the strongest against the Japanese Yen, with USD/JPY elevated near the 156.80 area, amid rising US Treasury yields [1]. The DXY is modestly up 0.04% at 98.05, supported by Iran’s war remarks and revived geopolitical risk [2].
Gold (XAU/USD) edged higher during the North American session, trading at $4,705 after reaching a daily high of $4,764, as rumors about the US relaunching Project Freedom to secure the Strait of Hormuz increased geopolitical risk. However, a US official later denied preparations to resume the operation. Saudi Arabia and Kuwait lifted restrictions on US military use of their bases and airspace, potentially opening the door for renewed hostilities between the US and Iran [2]. Bullion prices recoiled from the daily high as oil prices recovered, and gold faces key resistance around $4,760 [2].
US economic data showed Initial Jobless Claims rising to 200K from 190K, below market expectations of 205K–206K, while Continuing Claims declined to 1.766 million, indicating a resilient labor market ahead of Friday’s Nonfarm Payrolls report [1][2]. The US Challenger Job Cuts increased from 60.62K in March to 83.687K in April [2]. Federal Reserve officials signaled a cautious stance: Cleveland’s Fed Beth Hammack said rates will be on hold for quite some time, while San Francisco’s Mary Daly maintained a neutral-to-hawkish stance, committed to bringing inflation back to the Fed’s 2% goal. Daly noted that policy is slightly restrictive and could exert downward pressure on prices if the US-Iran conflict resolves [2]. Minneapolis Fed President Neel Kashkari commented that inflation is too high and expressed optimism about AI [2]. Money markets have priced in no interest rate cuts by the Federal Reserve in 2026 [2].
An escalation of the US-Iran conflict could prompt traders to price in an inflationary shock due to higher oil and natural gas prices, with further downside in gold expected as major central banks are expected to keep rates steady [2]. Market participants are now focusing on upcoming Federal Reserve speeches and the release of Nonfarm Payrolls data this Friday, with projections indicating an increase of 62K jobs in April [2].
CONCLUSION
Heightened tensions between the US and Iran over the Strait of Hormuz have supported both the US Dollar and gold prices, as unresolved peace talks and revived geopolitical risk drive market caution. Economic data and Federal Reserve commentary reinforce a steady policy outlook, with traders closely watching upcoming payrolls and central bank statements for further direction. The situation remains fluid, with potential for significant market moves if conflict escalates or resolves.