Dollar Retreats Amid Optimism Over Ceasefire, Pound Sterling Soars

The US dollar weakened on Tuesday after President Donald Trump announced a ceasefire between Israel and Iran, triggering a wave of risk appetite that weighed on the safe-haven currency.

At 03:00 ET (08:00 GMT), the U.S. Dollar Index fell 0.3% to 97.752, although it remained on track for a weekly gain.

Trump declared that the ceasefire between the two nations is now “in effect” and urged both sides to abide by the agreement. The announcement came after 12 days of deadly attacks and sent oil prices tumbling while improving global market sentiment.

“Markets are significantly reducing geopolitical risk,” ING analysts said, citing Trump’s statement following measured retaliatory strikes against U.S. positions in Qatar.
“The modest support the dollar had received in recent days faded as oil prices corrected lower.”

Attention is now focused on Washington, where Fed Chairman Jerome Powell begins two days of testimony before Congress. Lawmakers are expected to press him on the Fed’s decision to keep rates unchanged and on Trump’s recent calls to cut rates by “two or three points,” accusing Powell of “incompetence.”

According to ING, “Markets may interpret any change in Powell’s tone as a sign that political pressure is compromising the Fed’s independence, which could accelerate the dollar’s losses.”

The Euro and Pound Strengthen

In Europe, the EUR/USD rose 0.1% to 1.1591, supported by falling energy prices—a boon for the EU, which is heavily dependent on oil and LNG imports.

Germany’s Ifo Business Climate Index rose to 88.4 in June from 87.5 in May, thanks to improved expectations that boosted confidence. GBP/USD surged 0.7% to 1.3596 after U.K. food price inflation hit 4.7% in the four weeks to June 15, its highest level since March 2024, according to Kantar.

The increase—driven by higher prices for chocolate, butter, and meat—may complicate the Bank of England’s efforts to justify further rate cuts amid persistent inflation.

Yen Recovers, Yuan Remains Stable

In Asia, USD/JPY fell 0.8% to 144.97 as the yen recovered from Monday’s losses. Despite its safe-haven status, the yen saw moderate demand following U.S. strikes on Iranian nuclear facilities. This week, investors are watching Tokyo inflation data for clues on the Bank of Japan’s policy path.

Meanwhile, USD/CNY dipped slightly to 7.1780, remaining stable after the People’s Bank of China kept its benchmark interest rate unchanged last week.