Last week, US indices showed moderate growth. Donald Trump stated that the US-Israeli military campaign against Iran could end in 2 to 3 weeks. Hopes in the global market for a quick resolution of the conflict and a return to normalcy sparked a recovery for indices. Positive macroeconomic data provided additional support. The currency market saw mixed dynamics. The dollar is in demand because it's both a safe-haven asset and the currency in which most payments for rising oil and gas prices are made. Fears of rising inflation are also fuelled by expectations of prolonged high interest rates in the US, which is also good news for the dollar.
Brent crude oil prices declined at the beginning of the week on hopes that the Middle East conflict would end quickly. However, by the end of the trading week, they had returned to $109 after statements from Donald Trump that the US would launch powerful strikes against Iran.
The US. Durable goods orders
Durable goods orders show future activity in the economy's manufacturing sector. Global analysts expect the indicator to rise in the reporting period. This indicates that businesses and consumers are generally confident in the future of the US economy. An improvement in this key macroeconomic indicator is favourable for the dollar since it will allow the US Federal Reserve to keep its tight monetary policy. In this environment, EUR/USD could decline to 1.1440.
US Federal Reserve meeting minutes
In recent months, US inflation has been moving toward the Federal Reserve's target level. Coupled with relatively weak labour market data, this led to expectations that the US regulator would continue to gradually ease its monetary policy. However, the situation has changed significantly in recent weeks. The conflict in the Middle East is driving up energy prices, which will undoubtedly impact the cost of other consumer goods and services. As a result, despite the worsening employment situation in the US, the Fed will be forced to exercise caution to prevent a sharp increase in inflation. Hints that the regulator won't rush to cut rates are good news for the dollar. In such a scenario, USD/JPY could continue to rise to 160.40.
The US. Inflation rate
The conflict in the Middle East isn't slowing down. The Strait of Hormuz remains closed to most vessels, which is negatively impacting oil and liquefied natural gas supplies in the global market. This is leading to rising energy prices, which are also factored into the prices of other goods and services. Against this backdrop, global analysts expect US inflation to increase significantly. Rising inflation will prevent the Fed from cutting its key interest rate to stimulate economic growth. Maintaining a tight monetary policy is good news for the dollar but unfavourable for dollar-denominated assets, such as gold. In this context, XAU/USD could decline to 4,590.00.