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market analysis
U.S.-Iran talks break down, geopolitical risks rise again, boosting dollar
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market Analysis]: U.S.-Iran negotiations break down, geopolitical risks rise again to boost the US dollar". Hope this helps you! The original content is as follows:
In Asian trading on Monday, the U.S. dollar index hovered around 99. The U.S. dollar index fell last Friday, recording its largest weekly decline since January. Investors unwind their safe-haven positions, betting that oil shipments will resume if the ceasefire in the Gulf region is maintained.
Analysis of major currency trends
US dollar: As of press time, the US dollar index is hovering around 99. Although Pakistan mediated nearly 21 hours of intense discussions, the high-level negotiations between the United States and Iran failed to achieve a breakthrough. US Vice President J.D. Vance said that Washington had proposed the final and best solution, but Tehran refused to accept the terms, leading to the deadlock. Separately, U.S. President Donald Trump said on Sunday that the U.S. Navy would begin blocking the Strait of Hormuz, threatening a fragile two-week ceasefire. This in turn impacted global risk sentiment, supporting the safe-haven US dollar (USD). At the same time, the latest developments have raised the risk of further escalation in tensions in the Middle East and heightened concerns about a global energy crisis, driving crude prices sharply higher and reigniting inflation concerns. This xmserving.comes on top of data released on Friday showing U.S. inflation surged at the sharpest pace in nearly four years in March, further confirming market bets that the Federal Reserve will take a more hawkish stance. The outlook remains supportive of a new rise in U.S. Treasury yields, further benefiting the dollar.



1. The United States and Iran took a tough stance on the Strait of Hormuz again after failed negotiations
The negotiations between the United States and Iran in Islamabad ended on the 12th, and the two sides did not reach any agreement. Iran said the negotiations were in an "atmosphere of distrust and suspicion" and that the two sides had differences on two or three important issues. The United States said that the United States has very clearly stated its "red line", but Iran does not accept the US conditions. Trump said the United States would immediately initiate a naval blockade of the Strait of Hormuz, blocking any ships trying to enter or exit the strait. The Iranian military emphasized that all ship activities in the Strait of Hormuz are currently under strict monitoring and xmserving.complete control of the Iranian armed forces. Any wrong move will cause the enemy to suffer serious losses.
2. After the breakdown of negotiations, Trump is considering launching limited strikes against Iran
After the breakdown of US-Iran peace talks led by Vice President Vance, Trump is considering restarting limited military strikes and imposing a blockade on the Strait of Hormuz. According to multiple officials and people familiar with the matter, Trump may also restart a xmserving.comprehensive bombing campaign, but given that such a move may further exacerbate regional instability and his unwillingness to engage in a long-term military conflict, this option is less likely. He could also choose to implement a temporary blockade while putting pressure on allies to assume responsibility for long-term military escort missions in the strait in the future. After U.S.-Iran talks collapsed in Pakistan, Trump spent much of Sunday at his private resort in Doral, Florida, in the Miami suburb of Florida, attending Fox News programs, playing golf and xmserving.communicating with advisers. Aides say he remains concerned about Iran's infrastructure despite announcing a blockade and renewing threats to strike itBe open to resolving issues through diplomatic means. Trump said on the Fox News program: "I don't want to do it, but their sea areas, desalination facilities, power plants, these targets are all very easy to attack."
3. New Zealand Federal Reserve Chairman: Will announce increased transparency in monetary policy decisions
New Zealand Fed President Anna Breiman said that the Federal Reserve will soon announce relevant measures to increase the transparency of its monetary policy decisions. Currently, the RBNZ's policy xmserving.committee determines the official cash rate either by consensus or by voting, but the decision-making methods of individual members are not disclosed. When asked on Sunday whether he supported the results of the public vote, Breiman said: "This is a decision between the Monetary Policy xmserving.committee and the Finance Minister. We have gone through the relevant process and will announce possible adjustments soon." Breiman joined the New Zealand Reserve Bank from Sweden's Reserve Bank in early December, and the New Zealand Reserve Bank is regarded as one of the most transparent central banks in the world. She has held a press conference after every rate decision (rather than just one every quarter), and from 2027 the Monetary Policy xmserving.committee will make eight rate decisions a year, up from seven currently.
4. The market expects that the probability of a 25 basis point interest rate cut this year is only about 1/3. Investors may face greater challenges next month.
After data showed that gasoline prices increased due to the Iran war and U.S. inflation accelerated in March, bond traders slightly reduced their bets that the Federal Reserve will cut interest rates once this year. Pricing in the interest rate swap market on Friday showed that the probability of the Fed cutting interest rates by 25 basis points this year is about one in three, little changed from before the data was released. U.S. Treasury bonds edged lower after the report was released, with yields rising by two to three basis points across all maturities. Tomdi Galoma, managing director of Mischler Financial Group, said: "Today's CPI data will not support bond prices, because next month's inflation report will cause more trouble for investors and the Federal Reserve."
5. US media said there are three main sticking points in the US-Iran negotiations
The US "New York Times" reported on the 12th, citing two informed Iranian officials, that there are three main sticking points in the US-Iran negotiations: the reopening of the Strait of Hormuz, the issue of enriched uranium and the unfreezing of Iran's overseas assets. According to reports, the United States has demanded that Iran immediately reopen the Strait of Hormuz to allow all maritime shipping. "Iran refuses to give up control of this chokepoint," the two officials said, adding that it would only do so if a final peace deal is reached. Iranian officials said Iran is demanding xmserving.compensation from the United States for damage caused by the air strikes and the unfreezing of Iran's frozen oil revenues in Iraq, Luxembourg, Bahrain, Japan, Qatar, Turkey and Germany for reconstruction. But the United States rejected these demands. According to the report, another problem is that US President Trump requires Iran to "hand over or sell its entire stockpile of near-weapons-grade enriched uranium." Officials said Iran made a counter-proposal but the two sides were unable to reach a xmserving.compromise.
Institutional perspective
1. CICC: It is expected that the global monetary order may continue to be restructured, pushing the U.S. dollar to maintain a long-term depreciation trend
CICC Research reported that after the short-term factors’ effect on the U.S. dollar has subsided, the narrative of the reorganization of the global monetary order and the shaken U.S. dollar hegemony may once again dominate the market direction: The U.S.’s external net liabilities continue to accumulate, giving it a stronger appeal for U.S. dollar depreciation; Trump’s policy uncertainty is high, and the risk of U.S. dollar “weaponization” has not been alleviated, which is also suppressing market demand for U.S. assets. If the "balance sheet reduction" policy advocated by the new Federal Reserve Chairman Warsh can be implemented, it will objectively help restore the credibility of the US dollar. However, Warsh's policy is subject to the endurance of the real economy and financial markets as well as political constraints, and Trump's foreign, trade and economic policies are still having a negative impact on the credibility of the US dollar. Taking into account the overall impact of Warsh and Trump's policies, it is impossible to conclude that the credibility of the US dollar will improve in the future. We expect that the global monetary order may continue to be restructured, driving the U.S. dollar to maintain its long-term depreciation trend.
2. Analyst: The failure of U.S.-Iran negotiations will give the dollar further momentum to rise
Fiona Lim, senior strategist at Maybank, said that the market may be a little disappointed with the failure of U.S.-Iran negotiations, but this is not xmserving.completely unexpected. The U.S. dollar is likely to gain further upside momentum at the open on Monday. Some Asian currencies, especially those of net energy importers such as the Korean won, Philippine peso, Japanese yen, and Thai baht, had already begun to weaken last Friday and may continue to face pressure this week.
The above content is all about "[XM Foreign Exchange Market Analysis]: U.S.-Iran negotiations broke down, geopolitical risks rose again to boost the US dollar". It was carefully xmserving.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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