Dollar Weakens Amid Peace Hopes, US Inflation Data May Revive Fed Hike Bets

This week saw the US dollar weaken against most of its major peers following headlines suggesting progress in the Middle East conflict between the US and Iran.

The greenback gained some ground only against the Japanese yen, which gave back a portion of its gains after coordinated intervention by Japan and the US.

US Treasury Secretary Scott Bessent said that there was a strong chance of an imminent deal on reopening the Strait of Hormuz, adding that talks about ending the conflict were to follow.

Oil prices dropped as the prospect of an imminent reopening of the strait eased inflation fears and prompted investors to scale back their rate hike bets.

Next week's US CPI inflation numbers for July may revive September Fed hike bets, despite recent easing in tensions between the US and Iran and the drop in oil prices.