Market Overview

At 16:40 ET (20:40 GMT) the U.S. dollar index, which measures the greenback against six major peers, was up 0.1% at 101.52, marking a marginal rise after a week that had been the strongest in over a month amid heightened Middle‑East tensions. The dollar’s modest gain came as oil prices retreated, reducing inflationary pressure and dampening safe‑haven demand.

Federal Reserve Outlook

The Federal Reserve’s policy meeting on Wednesday is widely expected to leave the target range for the federal funds rate unchanged, with the CME FedWatch tool assigning a 62% probability to a hold. New Fed Chair Kevin Warsh, who has delivered largely hawkish remarks since assuming the role in June, reiterated the Federal Open Market Committee’s commitment to price stability and announced the creation of five task forces to review communications, the inflation framework and other operational matters. Traders will also focus on the upcoming release of second‑quarter U.S. GDP and the June personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation.

Commentary from Market Analysts

Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said markets will likely concentrate on the Committee’s assessment of core inflation now that forward guidance was ended after Warsh became Chair. He noted that the policy statement may present a mixed picture: modest house‑price and rent growth and a fading impact from the 2025 tariff hikes on the positive side, versus rebounding energy prices, renewed export disruptions from the Middle East and Russia, new tariffs, AI‑related price pressures on electronics, and labor‑supply bottlenecks in services such as home‑health and nursing care on the negative side. Adams added that any hint of guidance could suggest that the decision between holding rates steady or hiking in September will remain data‑dependent.

Oil and Geopolitical Developments

Oil prices fell on Friday, with Brent Spot down 0.91%, crude oil (LCO) down 1.51% and WTI (CL) down 1.69%, after a pause in the tit‑for‑tat strikes between the United States and Iran. Earlier in the week, oil had surged roughly 20% over two weeks as the United States and Iran exchanged strikes over control of the Strait of Hormuz. The New York Times reported that President Donald Trump halted plans to sharply escalate U.S. military operations in Iran after consultations with senior advisers, citing dwindling Pentagon stockpiles of air‑defense systems. The U.S. had conducted 13 consecutive days of strikes, to which Tehran responded by targeting U.S. bases in neighboring countries. Iran’s attacks on commercial vessels in the Hormuz Strait had previously collapsed an interim peace deal, and further disruptions were amplified by Houthi attacks on Saudi tankers in the Bab el‑Mandeb Strait.

Currency Movements

The euro was flat at $1.1367, while the British pound slipped 0.3% to $1.3287 as markets anticipate a gradual easing stance from the Bank of England later in the week. The Japanese yen weakened slightly, with USD/JPY down 0.1% to 163.76. In Indonesia, the rupiah fell 0.8% after Bank Indonesia Governor Perry Warjiyo unexpectedly resigned for personal reasons. Senior Deputy Governor Destry Damayanti was appointed interim governor to maintain operational continuity, though analysts warned the sudden leadership void could leave the rupiah vulnerable despite broader dollar weakness.

Diplomatic Remarks

U.S. Ambassador to the United Nations Mike Waltz told Fox News that talks with Iran were “ongoing” and occurring at every level. President Trump stated, “We’ve pretty much destroyed their military. They want to meet, and we’re meeting…There’s a good chance we could make a deal. If it doesn’t, we go back to what we were doing two days ago.”