Dollar Holds Steady as US-Iran Uncertainty Persists
The US dollar traded in a narrow range as a fragile ceasefire between the United States and Iran continued without clear prospects for renewed negotiations, prompting investors to shift their focus toward monetary policy signals from major central banks.
The US Dollar Index hovered around 98.40 on Wednesday (April 22), reflecting subdued market momentum. With the ceasefire between the United States and Iran still in place but lacking a defined diplomatic roadmap, market participants increasingly turned their attention to interest rate outlooks from the Federal Reserve and other global policymakers.
The planned negotiations between the US and Iran delegations originally scheduled to take place in Islamabad, Pakistan, ultimately did not materialize. Iranian Foreign Ministry spokesperson, Esmail Baghaei, stated that there was still no certainty regarding their attendance. This follows the blockade in the Strait of Hormuz, which he described as an "unacceptable act" by the US. At the same time, US Vice President JD Vance also canceled his visit to Pakistan.
Amid this uncertainty, US President Donald Trump decided to extend the ceasefire with Iran indefinitely. However, no formal mechanism or timeline has yet been announced for future negotiations between the two countries.
This ambiguous geopolitical backdrop has led market participants to adopt a wait-and-see approach. Movements in major currency pairs have been relatively limited within the same range since the beginning of the week, including AUD/USD, GBP/USD, USD/CAD, and USD/CHF.
Dominic Bunning, head of G10 foreign exchange strategy at Nomura, noted that overall market conviction remains relatively low. Nevertheless, he added that both Washington and Tehran appear to have limited appetite for renewed open conflict, providing a modest but supportive sentiment for risk assets.
Focus Shifts to Central Bank Policy Signals and Economic Data
While geopolitical developments remain a key backdrop, domestic economic factors have begun to exert greater influence on individual currency pairs.
EUR/USD is under pressure in the 1.1730 area as expectations for an interest rate hike by the ECB decline. Conversely, NZD/USD strengthened to reach a three-day high after inflation data was released higher than expected. For USD/JPY, its movement remains volatile ahead of the Bank of Japan's policy meeting next week.
In the United States, attention also turned to remarks from Kevin Warsh during his Senate confirmation hearing as a candidate for Federal Reserve chair. Warsh emphasized the importance of central bank independence and stated that he had made no commitments to President Trump regarding potential rate cuts.
His tone, perceived as more hawkish than market expectations, helped reinforce the outlook for higher US interest rates and provided underlying support for the dollar. This shift is reflected in Fed Funds Futures, which now indicate a 58.5% probability for interest rates to remain unchanged through April next year; differing from earlier projections that had left room for at least one rate cut.