Dollar Index declines on Iran deal report before stabilising after denial

• 101.70: DXY rebounds towards this level after hitting its lowest since 1 October.
• Lower energy costs support the Euro as Crude Oil retreats on the Qatar-Pakistan proposal.
• Thursday's jobless claims and Friday's flash PMIs are due during the Fed's quiet period.

The Dollar Index hit a low just above 101.50. Reports of preliminary approval from both Washington and Tehran for a compromise proposed by Qatar and Pakistan drove the index to its weakest since 1 October. The initial report took it from near 101.75 to about 101.65. A further decline followed when Israel's Channel 12 reported the terms. The index has since returned to near 101.70 after a diplomat involved in the talks rejected reports that an agreement was close.

As the reports sent Crude Oil lower, cheaper energy supported the Euro, which accounts for more than half the index's weight. Treasury Secretary Bessent attributed higher US rates to the energy shock. An agreement that resolves that shock could therefore bring lower US rates and a softer Dollar.

September housing starts came in at 1.221 million, below the 1.3 million forecast. Pending home sales also missed expectations, falling 7.3% to a record low rather than the projected 0.5% decline. Housing weakness supports the case against further Fed rate increases. The index nevertheless advanced on the bars corresponding to both releases.

28 October Decision: Claims and PMIs Ahead

With the October 27-28 Federal Open Market Committee (FOMC) meeting approaching, Fed officials have entered their quiet period. No Fed commentary is due before the decision on 28 October. Of 100 economists polled, 94 anticipate an October hold at 3.75%-4.00%, while all 100 forecast a December rate increase.

Thursday brings initial jobless claims at 12:30 GMT. On Friday, S&P Global releases its October flash Purchasing Managers Index (PMI) readings at 13:45 GMT. Both releases feed into the case for raising rates on 28 October rather than in December, an outcome expected by 6 of the 100 economists.

101.00: 50-Day EMA Sits Just Below

About a third of the index's advance had been erased at the session low. That rally ran from the 9 September low near 98.60 to the 14 October peak just under 103.00. The session trough also sits below Friday's dip near 101.60. At just under 101.00, the 50-day Exponential Moving Average (EMA) is about three-quarters of a point lower.

5-minute DXY chart