Dollar Surge Continues as Oil Risk Returns
The US Dollar is set for a defining week as oil prices and geopolitical tensions resurface. Last week's market developments showed the Dollar making its second consecutive weekly gain, with the Euro under pressure.
Key drivers of this trend included expectations of further interest-rate rises from the Federal Reserve, hopes that diplomacy might ease the Middle East oil shock, and strong business-activity data.
A 10-year US Treasury yield briefly traded as high as 5.22%, while the Dollar's rise was fueled by increasing market expectations of Fed rate hikes, with two further hikes of 0.25% now seen as likely by the market.
Crude oil prices, which had fallen on hopes for a reopening of the Strait of Hormuz, reversed direction after President Trump confirmed he had rejected Iran's conditional ceasefire proposal, citing US officials that he expects bombing to resume after the November midterm elections.