Dollar wobbles as investors monitor Israel-Iran conflict.
The U.S. dollar wavered against most major currencies on Wednesday, as fighting between Israel and Iran left investors nervous ahead of a keenly awaited Federal Reserve decision on interest rates later in the day.
Israel has pounded Iran over the past six days to halt its nuclear activity and has asserted the need for a change of government in the Islamic Republic.
The U.S. military is also bolstering its presence in the region, Reuters reported, sparking speculation of U.S. intervention that investors fear could widen the conflict in an area replete with energy resources, supply chains and infrastructure.
Against this backdrop, the dollar has found support as a safe haven, firming roughly 1% against the Japanese yen, Swiss franc and euro since Thursday and helping it to shave declines from earlier in the year.
The greenback had lost more than 8% so far this year due to eroding confidence in the U.S. economy due to President Donald Trump’s trade policies.
Oil prices ease.
Oil prices eased in Asian trade on Wednesday, after a gain of 4% from the previous session, as markets weighed the chance of supply disruptions from the Iran-Israel conflict against a U.S. Federal Reserve rates decision that could weigh on oil demand.
Brent crude futures slipped 49 cents, or 0.6%, to $75.96 a barrel by 0620 GMT. U.S. West Texas Intermediate crude futures fell 38 cents, or 0.5%, to $74.46 per barrel.
Both had initially been up 0.3% to 0.5% in early trade.
U.S. President Donald Trump called on Tuesday for Iran’s “unconditional surrender” as the Iran-Israel air war entered a sixth day.
The U.S. military is deploying more fighter aircraft to the region to bolster its forces, three officials said on Tuesday.
Israel is running low on defensive “Arrow” missile interceptors, however, raising concerns about its ability to counter long-range ballistic missiles from Iran, the Wall Street Journal said on Wednesday, citing an unidentified U.S. official.
UK inflation slows in May.
British inflation slowed as expected in May, pulled down by air fares which leapt in April and the correction of a tax data error, although food prices shot up at the fastest rate in more than a year.
Consumer prices rose in annual terms by 3.4% in May, the Office for National Statistics said on Wednesday, just as a Reuters poll of economists and the Bank of England had predicted.
Services price inflation – a crucial metric for the BoE – cooled to 4.7% from 5.4% in April, matching the BoE’s forecast for May. The Reuters poll had pointed to a reading of 4.8%.
Earlier this month the ONS said April’s headline consumer price inflation reading of 3.5% had been overstated by 0.1 percentage points due to an error in car tax data from the government.
April’s figures were not amended, but the correct data was used for May’s readings.
Air fares fell sharply after an Easter holiday spike in April’s readings.
The data are unlikely to shift interest rate expectations among economists and investors who think the BoE will leave borrowing costs on hold when it announces its June policy decision on Thursday.
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