The dollar index (DXY) rose 0.12% on Friday, recovering from a two-week low as tariff tensions reignited following President Trump’s threat to impose up to 25% tariffs on European automobile imports. Initially, the dollar weakened amid falling crude oil prices, which eased inflation expectations and dampened Fed policy outlook. However, escalating US-Iran tensions, particularly concerning the Strait of Hormuz, bolstered the dollar’s appeal as a safe haven.

This rebound in the dollar comes at a time when the market is grappling with mixed economic signals, including a weaker-than-expected ISM manufacturing report and rising inflationary pressures reflected in the ISM prices paid sub-index. Meanwhile, the euro fell against the dollar, influenced by tariff fears and expectations of an ECB rate hike, which stands at an 89% probability for June. The yen also faced pressure from the dovish outlook following Japan’s weaker CPI data.

Market professionals should closely monitor how ongoing geopolitical tensions and inflation data influence central bank policies, as these factors could significantly impact currency valuations and broader market sentiment in the coming weeks.

StoxFeed tracks this as a market signal: Oil prices are responding to OPEC decisions and geopolitical tensions

Source: nasdaq.com