US Dollar Weakening on Iran Deal Hopes and Upcoming Inflation Data

The US dollar weakened across the board on Tuesday after reports emerged of an imminent US-Iran deal. The weakness started when Qatari mediators announced that a possible agreement had been drafted, and then intensified when US Treasury Secretary Bessent confirmed that a deal could have been reached as soon as yesterday.

The anticipated timeline for the deal passing without an announcement likely led to the greenback's losses being trimmed late in the day. However, hopes for a deal will continue to weigh on the dollar unless there is another escalation.

The next major event that could impact the US dollar will be the upcoming US CPI report, which is critical for the September FOMC decision and the Jackson Hole Symposium. A hot report is likely to trigger a rally in the US dollar, with traders increasing rate hike bets, while a soft report should reduce further the risk of Fed tightening and put more pressure on the greenback.

On the JPY side, not much has changed since last week's massive intervention. The only notable development was US Treasury Secretary Bessent hinting at a faster BoJ tightening pace in his remarks to CNBC. Japan's currency diplomat Mimura stated that he had a shared understanding with the BoJ following the intervention.