The US dollar experienced a decline following President Donald Trump’s statement to CBS that the conflict in the Middle East might be nearing its end. This provided some relief to the turbulent global energy market. The Bloomberg Dollar Spot Index registered a 0.1 per cent drop on Monday in response to Trump’s comments, which drove energy prices down after they had surged past $US100 a barrel over the weekend.
In a phone interview with CBS News, President Trump stated, “The war is very complete, pretty much.” He also mentioned the US was considering taking control of the Strait of Hormuz, a crucial passage for global energy supply. According to Bipan Rai, managing director at BMO Asset Management Inc., this development alleviates some of the risks associated with energy prices for the markets, though not entirely.
Since the war began on February 28, the US dollar had been a safe-haven asset, boosted by the United States’ position as the world’s leading oil producer. The surge in energy prices had stoked fears of inflation, reduced expectations for Federal Reserve interest-rate cuts, and raised concerns about affordability for US consumers as the midterm elections in November approach.
Paresh Upadhyaya, a strategist at Pioneer Investments, noted, “It’s apparent to me, we’ve found President Trump’s pressure point.” He added that the President was facing significant political backlash due to rising gas prices in the lead-up to the midterm elections. Earlier in the session, both oil and the dollar had trimmed gains after news emerged that the Group-of-Seven countries were prepared to take action to curb soaring energy costs, despite not being ready to release stockpiles.
