Quick overview

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The dollar remained stable as investors considered Federal Reserve Chair Jerome Powell’s cautious stance on inflation; however, sentiment remained weak due to concerns about potential US involvement in a wider Middle East conflict.

The Fed held rates steady in a move that was widely anticipated. While not all policymakers agreed that rate cuts were necessary,  they are still expected to lower rates by half a percentage point this year. US President Donald Trump’s tariffs trickle down to consumers, and Powell predicted that inflation in goods prices would increase during the summer.

The dollar index, which compares the greenback’s strength to six other currencies, rose 0.8 percent for the week, reaching 98.957, its highest level since late February. As the Israel-Iran conflict entered its seventh day on Thursday, investors’ attention remained on developments in the Middle East.

Concerns about possible US involvement increased as Trump left everyone wondering if the US would join Israel in bombarding Iranian nuclear sites.

Powell stated at a press conference on Wednesday that “the tariff’s cost must ultimately be paid, and some of it will fall on the end consumer.” He added, “We are aware of that since companies say so.

Powell’s remarks, which drew further criticism from Trump, illustrate the challenges policymakers face in managing uncertainties related to tariffs and geopolitical risks. This creates concerns among investors regarding the future direction of U.S. interest rates.

Traders expect at least two rate cuts this year, although analysts are uncertain about the starting point. The Norges Bank and the Swiss National Bank are set to announce their policies later today.