USD Under Pressure as Markets Shift Focus from Geopolitics to Fed Independence

USD Weakens as Market Focus Shifts from Geopolitical Risk to Fed Independence

The US Dollar (USD) came under renewed pressure on Tuesday as global markets discount geopolitical risk, following the announcement of a ceasefire between Iran and Israel. The news was confirmed by US President Donald Trump, who brokered the agreement after retaliatory strikes in Qatar.

Ceasefire Deflates Oil and Safe-Haven Demand

In response, global oil prices have dropped over 15% since Monday's open, signaling a sharp pullback in energy-driven inflation fears and safe-haven flows that had previously supported the greenback. Israeli officials on Tuesday morning confirmed their participation in the truce, which further cemented market optimism and helped unwind risk premiums across assets.

Spotlight Turns to Fed's Independence Amid Political Pressure

With Middle East tensions de-escalating, attention turns inward toward the US Federal Reserve’s autonomy. Market participants are growing concerned that political influence may sway the central bank's decision-making process, especially as speculation grows over a potential rate cut at the July meeting.

While Fed officials, including Michelle Bowman, have maintained a data-dependent stance, Trump’s increasing commentary on monetary policy raises questions about the institution's independence.

Market Highlights:

• DXY Index weakens, tracking a retreat in USD demand
• WTI Crude falls >15% from Monday’s peak
• Investors await Fed Chair Jerome Powell's testimony for policy cues

What’s Next to Watch:

• Clarity on Fed’s policy outlook and autonomy signals
• Reactions in bond markets to dovish expectations
• Further compliance updates on the Israel-Iran ceasefire

Related Articles on Tredu:

• Oil Plunges to $66 on Mideast Ceasefire, Fed Cut Hopes
• Gold Dips Despite USD Weakness, Powell in Focus
• EUR/USD Eyes Breakout as Fed Testimony Looms