Safe-Haven Flows Dominate Monday Trade
The U.S. dollar strengthened for a second straight session on Monday, fuelled by a collapse in Iran ceasefire talks and a blockbuster U.S. jobs report that forced traders to tear up their Fed playbooks. Instead of the rate cuts many had priced in just weeks ago, markets now face a prolonged pause—and that’s reshaping currency, commodity, and equity flows.
Greenback Gains Across the Board
The euro slid 0.2% to $1.1757, while the yen fell 0.3% to 157.155 per dollar. The pound dropped 0.3% to $1.3590. Risk-sensitive currencies fared even worse: the Australian dollar lost 0.2% to $0.7229, and the New Zealand dollar shed 0.3% to $0.5948. The U.S. dollar index, which tracks the greenback against six major peers, edged up 0.1% to 98.103.
Oil Shock Rekindles Inflation Fears
Brent crude jumped 4.5% to $105.85 a barrel after President Trump rejected Iran’s response to a U.S. peace proposal, calling it “TOTALLY UNACCEPTABLE.” The 10-week-old conflict shows no sign of abating, and the resulting supply fears are pushing energy costs higher globally. For central banks, that means stickier inflation—and less room to ease.
Fed Rate Cut Hopes Fade Further
Wall Street’s biggest names are already shifting their timelines. Goldman Sachs and Bank of America now expect the Federal Reserve to keep rates on hold for longer, citing sticky inflation and a resilient labour market.
Goldman and BofA Push Back Expectations
Both banks pointed to the same set of data: China’s producer prices hit a 45-month high in April, U.S. non-farm payrolls smashed expectations, and the Middle East stalemate is keeping energy costs elevated. “The dollar remained on the back foot last week … but U.S. data remains resilient,” Barclays strategists noted.
Payrolls Surprise Reinforces Hold Stance
Friday’s jobs report showed 115,000 new positions in April—nearly double the forecast. That followed the deepest split at the Fed in decades, with three officials dissenting against signals of future rate cuts. The message is clear: the labour market has stabilised, and rate cuts are not coming any time soon.
Trump-Xi Summit: A Potential Game-Changer?
All eyes now turn to the Trump-Xi meeting later this week, where Iran, Taiwan, AI, nuclear weapons, and critical minerals are on the agenda. A breakthrough could unwind some of the recent safe-haven dollar demand—but if talks stall, expect another leg higher for the greenback.
Yuan Resilience Hints at De-escalation Hopes
The offshore Chinese yuan edged 0.1% higher against the dollar, marking an eighth consecutive daily gain. Traders appear to be betting that face-to-face diplomacy could ease geopolitical tensions, though the outcome remains highly uncertain.
Trading Implications: How to Position Now
For traders, the environment demands a defensive yet nimble approach. The dollar’s strength is likely to persist as long as Iran jitters and firm U.S. data dominate. However, any positive news from the Trump-Xi summit could spark sharp reversals.
Forex Pairs to Watch
- EUR/USD – Short-term downside risks remain while below 1.1800.
- USD/JPY – Yield differentials favour further upside toward 158.00.
- AUD/USD – Vulnerable to risk-off moves; watch 0.7150 support.
- USD/CNH – The yuan rally could extend if the summit yields progress.
Commodity and Stock Market Ripples
Oil’s surge is a double-edged sword. Energy stocks may benefit, but broader indices face headwinds from tightening financial conditions. Safe-haven flows are already visible in gold and the dollar. Traders should consider hedging equity exposure with long-dollar positions or volatility plays.
Key Takeaways for This Week
The dollar’s resilience is not a fluke—it’s built on concrete data and genuine geopolitical fear. Until the Iran situation de-escalates and U.S. data softens, the path of least resistance for the greenback is higher. Stay alert, stay hedged, and keep a close eye on the Trump-Xi headlines.
