Dollar Strengthens; Middle East Tensions Fuel Inflation Fears

The Greenback advances on fading expectations of imminent rate cuts from the Federal Reserve, with the yield on the US 10-year Treasury note holding around 4.06% after rising for two sessions. Higher energy prices, attributed to the Middle East conflict, have intensified inflation concerns, prompting markets to scale back bets on policy easing.

Investors now largely expect the US central bank to maintain interest rates until summer, despite calls from US President Donald Trump for lower borrowing costs. The US Dollar also benefits from safe-haven demand amid the ongoing Middle East war.

President Trump warned that escalation could lead to an equally hardline leadership in Iran, underscoring conflict uncertainty. Israel reportedly struck a building where Iranian clerics were meeting to select a new Supreme Leader and launched a new ground operation in southern Lebanon targeting Hezbollah.

Attention now turns to the US ISM Services Purchasing Managers’ Index (PMI) due later today.