U.S. Dollar Slides Amid Uncertainty Over Fed's Moves, Economic Data Releases

(RTTNews) - The U.S. Dollar value edged lower as investors attempted to gauge the U.S. Federal Reserve's policy outlook for the rest of the year in the backdrop of U.S. economic data releases amid a surge in crude oil prices due to the U.S.-Iran conflict.

Today, the U.S. Dollar Index DXY which measures the Greenback against a basket of other major currencies was last seen trading at 99.71, down by 0.36 (or 0.36%).

According to the Institute for Supply Management, the Chicago Business Barometer rose to 57.60 in July from 56.70 of the previous month, expanding for the third straight month, topping market expectations of 56.00. The increase was driven by new orders, which climbed to their highest level since January 2022.

The University of Michigan's Consumer Sentiment Index was revised higher to 55.20 in July from a preliminary reading of 54.00, reaching its highest level since February, before the US-Iran conflict drove gas prices higher.

While against the Euro, the USD was trading at 1.154, down by 0.14%, against the GBP, the USD was trading at 1.349, down by 0.19%.

Against the USD, the Japanese Yen was trading at 157.575, up by 1.21%.

The Bank of Japan kept its short-term policy rate unchanged at 1.00% at its July meeting.

Against the USD, the Swiss Franc was trading at 0.806, down by 0.25%; and the Canadian Dollar was trading at 1.401, down by 0.01%.

Against one unit of Australian Dollar, the USD was trading at 0.704, down by 0.24%.

In the Middle East crisis, the brief truce which lasted for four days between the U.S. and Iran since last weekend came to an abrupt end in four days after Iran attempted to hit U.S. bases in Jordan.

Compelled to retaliate, U.S. forces concluded a heavy wave of strikes over multiple targets in Iran.

Today, Kuwait announced intercepting and destroying Iranian drones.

Claiming that the Strait of Hormuz belongs to Iran, Iran's Islamic Revolutionary Guards Corps announced that it struck and stopped two tankers transiting the strait.

The escalation of tension which supported crude oil prices today has raised concerns of long-term inflation.

On Wednesday, the U.S. Federal Reserve kept the rates steady at the 3.50% to 3.75% range after the Federal Open Market Committee voted (9 in favor and 3 against) to maintain the target interest.

All three dissenters, Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan called for a "25-basis point hike"

The U.S. Federal Reserve Chair Kevin Warsh insisted that the Fed is working to curtail the inflation around the 2% range. However, Warsh offered no forward guidance on the policy outlook, leaving investors to speculate on the Fed's rate trajectory.

With the Middle East crisis showing no signs of abating in the near-term, and crude oil prices tending to move upward at every instance of U.S.-Iran firings, the resultant inflationary pressure is expected to push the Fed to consider rate hikes.

Currently, investors are betting on a 65.10% chance of a quarter-point interest rate-hike in the upcoming meeting of the U.S. Federal Reserve on September 15-16 while the odds on rates being held at the current level stand at 34.90%, according to the CME Group's FedWatch Tool.