By Konstantinos Chrysikos, Head of Customer Relationship Management at Kudotrade
Escalating tensions in the Middle East continued to dominate market sentiment on Monday, keeping the dollar index stable and on an uptrend, with safe-haven demand elevated. US Treasury yields edged lower but stayed near recent highs, and could continue to rise on persistent inflation concerns.
Markets continue to grapple with the fallout from ongoing tensions in the Middle East. The prospect of prolonged supply disruptions prompted investors to reassess the Federal Reserve’s policy trajectory. Elevated energy costs have revived expectations of a cautious monetary policy, benefiting the greenback and treasury yields.
Looking ahead, this week’s labor market releases, including JOLTS, ADP, and Friday’s payrolls report, will be critical in shaping the monetary policy expectations. A resilient jobs print would reinforce hawkish repricing and support the dollar, while a meaningful miss could revive growth fears and pressure yields lower. Apart from economic data, any further escalation in geopolitical risk or additional oil price spikes would likely sustain safe-haven dollar demand regardless of the data outcome.
