US Dollar Index Slips to 98.50 as Market Awaits Fed’s Monetary Policy Report

US Dollar Index Weakens as Fed Report and Iran Tensions Loom

Key Highlights:

• DXY falls to 98.50, extending its two-day slide.
• Market focus shifts to Friday’s Fed Monetary Policy Report to Congress.
• Powell warns of risks from prolonged policy uncertainty.
• Geopolitical concerns over US–Iran–Israel tensions drive safe-haven considerations.
• Potential US military involvement could revive USD strength short-term.

DXY Down Slightly as Fed Outlook Comes Into Focus

The US Dollar Index (DXY) is drifting lower near 98.50, marking its second consecutive day of weakness. The move appears driven by technical rebalancing and anticipation ahead of the Federal Reserve's semi-annual monetary policy report to Congress due Friday.

Fed Chair Jerome Powell previously cautioned that uncertainty around fiscal and geopolitical policy could hamper economic momentum. Markets will look for signals on interest rates, inflation forecasts, and economic resilience in the Fed's report.

Geopolitical Uncertainty May Reverse USD Weakness

Despite the current dip, analysts warn that the USD may regain traction if tensions escalate in the Middle East. Recent revelations suggest Iran is still undecided on building a nuclear weapon but may shift its stance if provoked.

US intelligence agencies remain wary, and President Trump is reportedly giving Iran a final two-week window to strike a nuclear deal before considering military action. Heightened risk of conflict may trigger a renewed safe-haven flow into the US Dollar.

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