US Dollar Index retraces to near 98.60 as Trump reassesses decision to strike Iran

• The US Dollar corrects as US President Trump has no plans to strike Iran immediately.

• The Fed sees fewer interest rate cuts in 2026 and 2027 than it anticipated previously.

• US housing demand slows down amid higher mortgage rates and Trump policy uncertainty.

The US Dollar (USD) retraces from its weekly high as comments from the White House that it will decide on its plans of striking Iran in the next two weeks have provided interim relief to investors.

On Thursday, Press Secretary Karoline Leavitt said, “Based on the fact that there is a substantial chance that negotiations may or may not take place with Iran in the near future, I will make my decision whether or not to go, within the next two weeks,” ANI News reported.

The development has come in as negative for safe-haven assets, such as the US Dollar, which performed strongly after a report from Bloomberg on Wednesday showed that senior US officials are preparing for the possibility of a strike on Iran as soon as the weekend.

During the European trading session on Friday, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, corrects to near 98.60 from the weekly high of 99.15 posted on Thursday.

Meanwhile, the downside in the US Dollar is expected to remain limited as the Federal Reserve (Fed) has anticipated a higher interest rate target for the next two years in its monetary policy announcement on Wednesday and warns of significant upside inflation risks.

The Fed’s dot plot showed on Wednesday that policymakers have revised the interest rate target higher to 3.6% and 3.4% for 20267 and 2027, respectively.

On the economic front, US housing demand has shown signs of slowing down due to higher mortgage rates and uncertainty surrounding new economic policies announced by President Donald Trump. The Housing Starts data showed on Wednesday showed that new single-family houses constructed in May were 1.256 million on month, significantly lower than expectations of 1.360 million and the prior release of 1.392 million.

Weak housing demand from individuals has dented the sentiment of homebuilders, forcing them to cut prices to attract buyers, Reuters reported. This week, the National Association of Home Builders showed that the Housing Market Index fell to 32 in June. This is the lowest reading seen since December 2022.