The US dollar stabilized on Tuesday near a ten-day low, supported by an agreement to end the Iran conflict which boosted risk appetite. Meanwhile, the Japanese Yen fluctuated around 160 against the dollar after the Bank of Japan raised interest
rates, a move expected to curb inflation risks stemming from the conflict. This followed US President Donald Trump's announcement of a preliminary agreement between the United States and Iran to end the Middle East dispute. Despite undisclosed details, global markets welcomed
the news, leading to a drop in oil prices. Investors this week are focusing on upcoming meetings of major central banks, including the Bank of England and the Federal Reserve, to assess the impact of the conflict's end on alleviating short-term
inflation concerns. In related news, the Bank of Japan raised interest rates Tuesday to their highest level in 31 years, a largely anticipated move that did not greatly surprise markets. However, market analysts noted the seven-to-one vote result, indicating some ambiguity
regarding the timing of the next rate hike. The Yen settled at 160.23 against the dollar, hovering near the 160 threshold, which alerts traders to potential Japanese government interventions. The Middle East agreement is unlikely to provide significant support to the
struggling Yen. Elsewhere, the Australian dollar fell 0.3% to $0.705, following the Reserve Bank of Australia's unanimous decision to keep interest rates unchanged after three consecutive hikes, despite persistent inflation. The agreement between the United States and Iran stipulates extending the fragile
ceasefire, announced in April, for an additional 60 days, and allowing the reopening of the Strait of Hormuz, which Tehran had effectively closed since the conflict began in February. The Euro stabilized at $1.159, slightly below its ten-day high of $1.1622
recorded on Monday. The British Pound traded at $1.3413 on Tuesday. The dollar index (measuring the US currency's performance against six major currencies) registered 99.66 points, having risen 2% since the conflict erupted in late February, in a volatile reaction
to the fragile ceasefire and reciprocal attacks. Tony Sycamore, an IG market analyst, explained that "energy markets quickly moved to assess the immediate risks of prolonged supply disruptions, but the path back to normal flows remains far from easy." Questions surrounding the
return of supply chains to normalcy are likely to keep investors on edge, with continued uncertainty regarding the short-term trajectory of inflation and interest rates. For their part, ING analysts indicated that the market's reaction was faster than the reality on
the ground, and could change based on the likelihood of a final agreement.
