NEW YORK: The dollar rose on Monday as investors eyed developments in the Iran war, while the pound fell from earlier highs as markets prepared for new British Prime Minister Andy Burnham.
Yemen’s Iran-aligned Houthis said they were imposing a naval blockade on Saudi Arabia, a move that opens a new front against the United States in its war on Iran and widens the threat to global energy supplies and trade beyond the Gulf.
Crude prices came off their initial move higher, however, as Tehran and Washington signaled they wanted to resume diplomacy.
US crude was upjust 0.01 percent at USD82.50 a barrel and Brent rose to USD88.17 per barrel, up 0.08 percent on the day, after earlier hitting their highest levels in more than a month.
The dollar index, which measures the greenback against a basket of currencies, climbed 0.17 percent to 100.91, with the euro down 0.23 percent at USD1.1413.
“There’s a lot of conflicting news coming from the Middle East, on one hand, it looks like it could be escalating, on the other hand, it looks like there’s another like last ditch effort to try to like get a new ceasefire and that’s why oil came off,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York.
The economic calendar for the week is light, and Federal Reserve officials are in a “blackout period” of public comments ahead of the central bank’s meeting next week.
Recent reports on US inflation and the labor market have caused markets to sharply curb expectations for a rate hike from the Fed next week, pricing in only a 14.4 percent chance for an increase, according to CME Fedwatch, down from more than 40 percent a week ago. Expectations for a hike at the September meeting are at 65.5 percent, however.
A bevy of Fed officials, including Chairman Kevin Warsh, have flagged concerns about inflation pressures in recent weeks while noting the labor market remains stable.
The European Central Bank will hold a policy meeting later this week, with markets pricing in only a 13.1 percent chance of a hike, according to LSEG data, with a 77.9 percent chance for an increase at its September meeting.
Sterling weakened 0.04 percent to USD1.3448 after climbing to USD1.3481 as Burnham took over from Keir Starmer, becoming Britain’s seventh Prime Minister in a decade as he pledged to reshape the country’s politics and deliver a new economic model.
Elsewhere, the US dollar was down 0.14 percent at 6.7688 against the Chinese yuan in offshore trade after China kept its benchmark lending rates unchanged for a 14th consecutive month on Monday, in line with market expectations.
Against the yen, the dollar strengthened 0.09 percent to 162.54 in thin liquidity as Japan observed the Marine Day holiday.
Comments