Fed more likely to boost the dollar than Mideast conflict

The dollar has made some further gains this week, on net, but remains not far off its weakest level in three years. It has mainly benefitted on the back of a somewhat hawkish FOMC announcement, which contrasts with dovish policy signals from some other G10 central banks. While the ongoing conflict between Israel and Iran has led to some further volatility this week, its impact on the main asset and currency markets has remained limited, on balance, with hopes of a negotiated solution rising over the past couple of days. That said, the situation in the Middle East and its potential wider fallout clearly remains the key source of uncertainty in the near-term, adding to an already-congested list of event risks for the next few weeks (headlined by the expiration of the 90-day “pause” for the “Liberation Day” tariffs on 8th July and the fiscal bill now under negotiation in the US Senate).