US Dollar Strengthens as Iran Deal Talks Gain Momentum
The US dollar has strengthened further due to optimism about a potential deal between the US and Iran to halt the conflict in the Middle East.
This comes after President Trump's speech, where expectations for progress were low, but the meeting between US officials and Iranian officials later in the day was described as 'very good' and 'productive'.
The talks took place with a sense of urgency, given the approaching mid-term elections and the continued rise in energy prices. Retail gasoline prices in the US have surged 10% so far in September, while diesel prices have broken above their 2022 highs to set a new record.
Brent crude oil has dropped around 4% from its intra-day high yesterday, marking the sixth consecutive day of decline, which would be the longest period since August 2025 if maintained. However, this drop in energy prices does not seem to be translating into broader FX and rate movements.
The US dollar's strength is also influenced by comments from Fed officials, who have been hawkish on further tightening. Richmond Fed President Barkin argued that it will take time to bring inflation back to target, while there is a risk of current elevated inflation impacting inflation expectations.