The dollar index eased on Monday but contained its losses within the previous session's range as market participants sorted through a confluence of events and risks, including a heavy slate of central bank meetings this week along with a full-blown Middle East conflict. Iran has been urgently signaling that it seeks an end to hostilities and resumption of talks over its nuclear programs, sending messages to Israel and the United States via Arab intermediaries, the Wall Street Journal reported, citing officials. Sources told Reuters that Tehran had asked Qatar, Saudi Arabia and Oman to press U.S. President Donald Trump to use his influence on Israel to push for an immediate ceasefire. In return, Iran would show flexibility in nuclear negotiations, said the two Iranian and three regional sources.
Iran wants to talk about de-escalating hostilities with Israel, and should do so immediately "before it's too late."
Since the initial news that Israel launched its air war on Friday with a surprise attack on Iran, markets appear to be encouraged by the fact that the conflict has not spread.
Israeli Prime Minister Benjamin Netanyahu told troops at an air base that Israel was on its way to achieving its two main aims: wiping out Iran's nuclear programme and destroying its missiles. EUR/USD advanced and techs were leaning bullish, but the key question is whether the Fed will deliver a message to support longs. USD/JPY gained modestly but within the context of a Bollinger Band width that is the narrowest since January before BOJ, as the market awaited a BOJ decision on Tuesday. Sterling firmed but held below resistance with a Bank of England meeting coming into focus on Thursday.
U.S. Treasury yields rose 1-3bp across maturities with the 2s/10s curve steepening by about 3bp. The S&P 500 was up 0.81% in New York afternoon trade as falling oil prices -- after the Israel-Iran attacks left crude production and exports unaffected -- allayed investor concerns and allowed focus to turn to the upcoming Fed meeting.
U.S. oil prices had fallen 2.08%, encouraged by the reports that Iran was seeking an end to hostilities with Israel, which raised the possibility of a truce and eased fears of a disruption to crude supplies from the region.
Gold was down 1.3% as the Iran news encouraged traders to take profits after prices had hit an eight-week high.
Copper firmed 0.24%, helped by news of higher consumer spending in China that raised hopes of a boost to demand in the country.
Heading toward the close: EUR/USD +0.22%, USD/JPY +0.36%, GBP/USD +0.15%, AUD/USD +0.72%, .DXY -0.17%, EUR/JPY +0.58%, GBP/USD +0.57%, AUD/JPY +1.11%.(by Burton Frierson )
