US Dollar up as tensions escalate in the middle east

The US Dollar began the week strengthening against most of its counterparts, driven by escalating tensions in the Middle East after reports emerged of a drone strike by Iran on Israel.

Later in the afternoon, the greenback managed to edge higher following the release of robust US retail sales data. March's figures came in at 0.7%, significantly surpassing the more conservative prediction of 0.3%.

USD maintained its strength on Tuesday, trading close to a five-month high against several currencies, buoyed by a cautious market sentiment that favored the safe-haven currency.

Nevertheless, on Wednesday, the US Dollar encountered resistance as there was a modest retreat in US Treasury yields.

Thursday saw the Greenback being bolstered by better-than-expected US jobless claims, as they matched last month's figures and fell below market expectations.

As the week drew to a close, USD exchange rates received modest support as markets reverted to jittery trading conditions.

After reports of Israel's drone and missile attack on the Iranian city of Isfahan, the escalating conflict in the Middle East dampened market sentiment, strengthening the safe-haven appeal of the US Dollar. Looking forward, the main catalyst for movement in the US Dollar exchange rate this week is expected to be a variety of US macroeconomic data.

On Tuesday, the US is set to release its latest S&P Global manufacturing and services PMIs. Anticipating a slight uptick in both datasets, USD may attract buying interest early in the week.

Heading into Wednesday, the upcoming domestic durable goods orders are projected to decline from 1.4% to -1.2%. If the data aligns with expectations, this could weaken the Greenback in mid-week trading.

Thursday will bring the release of the latest US GDP data for the first quarter of 2024, which is also anticipated to reveal a significant downturn. This could potentially lead to a weakening of USD exchange rates.

As we move into Friday, the focus will be on the latest core PCE price index, which is expected to decrease from 2.8% to 2.7%. As the Federal Reserve's preferred measure of inflation, if the results align with expectations, this could inject volatility into USD exchange rates.

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