Dollar Retreats as Oil Prices Plunge on Middle East Tensions Easing

The US dollar retreated against major currencies on Monday as tensions in the Middle East eased, causing oil prices to plummet. The pause in US bombing in Iran led to a decline in crude prices, with Brent tumbling 7.5% to $89.42 per barrel.

Oil's slide lifted risk appetite ahead of a busy week of central bank meetings, which will provide insight into interest rates and inflation expectations. Traders see a roughly 33% chance of a quarter-point Fed rate hike on Wednesday, down from 37% last week.

Jane Foley, head of FX strategy at Rabobank, noted that the market may not be well-informed after this meeting because Warsh doesn't like to give forward guidance. The Bank of England and Bank of Japan are expected to keep interest rates unchanged at their meetings on Thursday and Friday.