USD forex pairs gain as peace talks progress in Switzerland

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Major U.S. forex pairs showed gains on Monday with the U.S. dollar increasing in value against virtually all of its counterparts. The bullishness for the greenback comes with a continued dampening with oil prices below the $80 mark (Source: Oilprice.com).

• WTI crude: 75.26 USD (-0.78%)
• Brent crude: 79.00 USD (-1.95%)
• Murban crude: 73.63 USD (-0.41%)

Asian equities showed a rebound as well with chipmaking and technology stocks leading growth. 

In the view of SGFX research desk, the current environment of growth sectors doing well and oil continuing to cool suggests that investors and the market’s risk sentiment is not pricing in geopolitical movements and the conflict as strongly as it used to at the start of the war. 

Also, with GCC countries now uninvolved in the Iran conflict and a scale back of attacks from the U.S., the risk could be more localized as of now, shifting from a global conflict to one focused more on the Middle East.

U.S currency pairs rose by the following amounts on Monday at the time of writing, according to Bloomberg data.

• USD/GBP: (+0.21%)
• USD/AUD: (+0.19%)
• USD/EUR: (+0.14%)
• USD/HKD: (+0.03%)
• USD/CHF: (+0.14%)
• USD/JPY: (+0.24%)
• USD/CAD: (+0.25%)

The U.S. dollar was trading at a 4-year low earlier this year in January with the DXY index—a measure of the dollar that assesses its value against six major currencies—dipping to an all-time low of 96.16. 

A 60-day deadline was set by both parties to form a final peace deal with more details coming in as the situation develops.

With oil prices not quite where they were before the conflict, petro-dollar flows are expected to be strong considering the current chokehold on oil.

Summary

In the view of SGFX research desk, rising bond yields for 10-year U.S. notes, preference for the U.S. dollar in global oil trade, and a continued shock to the global energy market means the greenback’s demand could surge in value due to a variety of broad-based market figures. Even though Iran has said the Strait of Hormuz will remain closed for now, oil continues to pass through the Strait (Source: Bloomberg)

Research references

• Stock Market Today: Dow, S&P Live Updates for June 22 - Bloomberg
• Hormuz Traffic Uptick Seen as Three Indian Tankers Reemerge - Bloomberg
• US-Iran Talks on Lasting Ceasefire Begin in Switzerland - Bloomberg
• Oilprice.com data

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