US Dollar Index recovers to 100 as Iran rejects ceasefire, inflation-heavy week looms
- The US Dollar Index clawed back early session losses to settle just above 100, recovering from a dip below the round number.
- Iran rejected a 45-day ceasefire proposal from regional mediators, calling it "illogical" and demanding a permanent end to the war.
- Institute for Supply Management Services data missed expectations while the Prices Paid subindex surged, reinforcing the stagflation narrative.
- A packed inflation calendar later this week features Personal Consumption Expenditures data on Thursday and Consumer Price Index on Friday.
The US Dollar Index (DXY) struggled to crimp downside momentum near the 100.00 handle on Monday after a volatile day that saw the index slide from overnight highs near 100.30 down to a session low near 99.75 before staging a late recovery. The 200-period moving average on the intraday chart capped the bounce, with price settling around 100.00. The Greenback's intraday weakness coincided with a broader risk-on tone across equities as traders initially weighed the prospect of a US-Iran ceasefire, though the optimism proved short-lived.
Iran rejection fails to lift the Dollar
A draft ceasefire proposal assembled by Egyptian, Pakistani, and Turkish mediators was rejected outright by Tehran on Monday. Iranian foreign ministry spokesperson Esmail Baghaei called the 45-day ceasefire framework "illogical," insisting Iran would only accept a permanent end to the war with guarantees against future attacks. Despite the hawkish tone from Tehran, the Dollar failed to catch a meaningful safe-haven bid. Markets appear increasingly desensitized to the diplomatic cycle, with equities closing comfortably in the green even as Oil prices remained elevated above $112 per barrel on West Texas Intermediate (WTI). President Trump's Tuesday deadline for Iran to reopen the Strait of Hormuz adds another layer of uncertainty heading into mid-week.
ISM Services flags employment weakness and price pressures
Monday's Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) came in at 54.0, missing the 55 consensus and down from 56.1 in February. The subcomponents were more telling for the Dollar outlook. The Employment Index collapsed to 45.2 from 51.8, its lowest since December 2023, which complicates the otherwise strong 178K Nonfarm Payrolls (NFP) print from Friday. Meanwhile, the Prices Paid Index surged to 70.7 from 63.0, with ISM respondents citing higher fuel costs and Iran-related supply disruptions as the dominant theme. The New Orders Index rose to 60.6 from 58.6, its best reading since February 2023. The combination of weakening employment, resilient demand, and surging input costs is a textbook stagflationary signal, one that makes the Federal Reserve's (Fed) job considerably harder and leaves rate expectations in limbo.
Inflation data to dominate the back half of the week
Wednesday's release of the Federal Open Market Committee (FOMC) Minutes from the March meeting will offer insight into how policymakers were framing the inflation-growth tradeoff before the latest surge in energy prices. Thursday brings the February Personal Consumption Expenditures Price Index (PCE), the Fed's preferred inflation measure, with Core PCE expected at 0.4% MoM and 3.0% YoY, alongside Q4 Gross Domestic Product (GDP) and Initial Jobless Claims. Friday is the main event. March Consumer Price Index (CPI) consensus sits at a striking 0.9% MoM, a sharp acceleration from February's 0.3%, which would push the YoY rate to 3.3% from 2.4%. Core CPI is forecast at 0.3% MoM and 2.7% YoY. The scale of the expected headline jump reflects the first full-month impact of elevated Oil prices flowing through to consumer energy costs. The University of Michigan (UoM) preliminary April consumer sentiment survey rounds out Friday's calendar, with the headline index expected to slip to 52 from 53.3, while the one-year and five-year inflation expectations readings will be closely watched for any signs that price pressures are becoming entrenched in household expectations. A hot CPI print could reinforce the case for rates staying higher for longer and provide the Dollar with a firmer bid heading into the following week.
DXY 5-minute chart
Technical Analysis
In the 5-minute chart, Dollar Index Spot trades at 100.03. The near-term bias is neutral with a slight bullish tilt as price stabilizes just above the 200-period exponential moving average near 100.00, signalling respect for medium-term intraday trend support. The Stochastic RSI has rebounded from oversold territory toward mid-range readings, indicating fading downside momentum after the earlier pullback from the 100.01–100.03 area. Holding above the moving average keeps intraday buyers engaged, but the lack of a strong momentum extension tempers directional conviction.
Immediate support emerges at 100.00, aligned with the 200-period EMA, with a break exposing the prior intraday lows near 99.96 as the next downside level. Below that, deeper support is located around 99.90, where a failure would flip the short-term picture decisively bearish. On the upside, initial resistance is set by the recent 100.03 high, with a sustained move above it opening the way toward 100.10 as the next objective. A clear consolidation above 100.03 would confirm that buyers have regained control of the 5-minute structure.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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