Dollar Index falls following Iran deal report, then stabilises after denial

• DXY rebounds towards 101.70 after touching its weakest level since 1 October.
• A Qatar-Pakistan proposal weighs on Crude Oil, while lower energy prices support the Euro.
• With Fed officials in their quiet period, Thursday brings jobless claims before Friday’s flash PMIs.

From near 101.75, the Dollar Index slipped to around 101.65 after initial reports that Washington and Tehran had both provisionally approved a compromise put forward by Qatar and Pakistan. When Israel’s Channel 12 reported the terms, the index extended its decline to just above 101.50, its lowest since 1 October. A diplomat involved in the talks subsequently rejected reports that an agreement was close, prompting a recovery towards 101.70.

As the reports sent Crude Oil lower, cheaper energy helped lift 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 brings that shock to an end could therefore lead to lower US rates and a softer Dollar.

September housing starts declined to 1.221 million, short of the 1.3 million forecast. Pending home sales, meanwhile, fell 7.3% to a record low, compared with expectations for a 0.5% decline. Although housing weakness strengthens the argument against further Fed rate rises, the index advanced on the chart bars corresponding to both releases.

Jobless claims and PMIs lead the calendar

Ahead of the Federal Open Market Committee (FOMC) meeting on 27-28 October, Fed officials have entered their quiet period, leaving no Fed commentary before the 28 October decision. Of 100 economists surveyed, 94 anticipate rates remaining at 3.75%-4.00% in October, while all 100 forecast a rise in December.

Thursday’s initial jobless claims are due at 12:30 GMT, followed on Friday at 13:45 GMT by S&P Global’s preliminary October Purchasing Managers Index (PMI) readings. Both releases inform the case for bringing a rate rise forward from December to 28 October, an outcome expected by 6 of the 100 economists.

DXY gives back part of its recent advance

By the session trough, roughly a third of the index’s advance from the 9 September low near 98.60 to the 14 October peak just below 103.00 had been retraced. That session low also sits below Friday’s dip near 101.60. At just under 101.00, the 50-day Exponential Moving Average (EMA) lies about three-quarters of a point further down.

DXY chart, 5-minute intervals