Market News

By Karen Brettell and Sophie Kiderlin

NEW YORK/LONDON, June 15 (Reuters) – The U.S. dollar fell on Monday and hit a 10-day low against the euro and sterling after an agreement to end the U.S.-Iran war pushed oil prices and Treasury yields lower while boosting investor risk appetite.

U.S. President Donald Trump said on Monday that a memorandum of understanding aimed at ending the war in the Gulf had already been signed by the United States and Iran.

Reports on the deal from both sides of the conflict boosted confidence that it would hold, according to Marc Chandler, Chief Market Strategist at Bannockburn Global Forex.

“Markets want to believe it,” Chandler said.

According to accounts from both sides, the agreement would reopen the blockaded strait and extend a ceasefire for a 60-day negotiation period, during which contentious issues such as the future of Iran’s nuclear programme are expected to be addressed.

An official signing ceremony for the agreement is scheduled to take place in Geneva on Friday.

Despite the optimism, markets remain cautious as investors await further details of the agreement and its formal signing.

“The level of mistrust is so great that I think it’s naive to assume it’s going to be very smooth,” Chandler added.

The U.S. Dollar Index, which measures the greenback against a basket of major currencies including the euro and the Japanese yen, fell 0.20% to 99.60.

The euro rose 0.25% to $1.1597, after earlier reaching $1.1622, its highest level since June 5.

Sterling strengthened by 0.1% to $1.342.

The Japanese yen weakened 0.03% against the dollar to 160.25 per dollar, remaining near levels that could potentially trigger official intervention by Japanese authorities.

In cryptocurrency markets, Bitcoin gained 4.5% to trade at $66,841.

Central Banks in Focus

Attention is now turning to a series of major central-bank decisions due this week, including announcements from the U.S. Federal Reserve, the Bank of Japan, the Bank of England, and the Reserve Bank of Australia.

Markets are focused on whether the peace agreement could ease inflation concerns and influence the near-term direction of monetary policy.

The Federal Reserve is widely expected to leave interest rates unchanged within the current range of 3.5% to 3.75% when it announces its decision on Wednesday. However, policymakers may signal a shift away from an easing bias.

Investors will closely watch comments from new Federal Reserve Chair Kevin Warsh during the post-meeting press conference for indications of the Fed’s future policy direction.

Current market pricing suggests a 56% probability of a rate increase by December, supported by a stronger labour market and inflation that remains above the Fed’s 2% target.

Meanwhile, the Bank of Japan is expected to raise interest rates to 1%, which would be the highest level in 31 years, at the conclusion of its two-day policy meeting on Tuesday.

The Japanese central bank is also expected to signal its willingness to continue tightening monetary policy in order to contain inflation risks, despite the positive impact of the peace agreement on global markets.