TLDR
- President Trump announced termination of the Iran framework agreement during NATO summit in Turkey
- Dollar Index advanced for fourth consecutive session, reaching seven-day peak
- Brent crude soared more than 6% amid Trump’s statements and Iranian military operations
- RBNZ increased interest rates 25 basis points to 2.5%, lifting the New Zealand dollar
- Market participants await Federal Reserve June meeting minutes under Chairman Kevin Warsh
The greenback continued its upward momentum Wednesday following President Donald Trump’s announcement that the provisional Iran agreement has been terminated, sparking safe-haven demand and propelling energy prices significantly higher.
During a NATO gathering in Turkey, Trump declared the framework agreement “over” following Revolutionary Guard attacks on American military installations in Bahrain and Kuwait. Tehran characterized these operations as payback for U.S. military strikes on Iranian soil and Washington’s withdrawal of sanctions relief on Iranian petroleum exports.
“We make a deal, and everyone’s agreed. No nuclear weapons. They go outside, talk to the press, they say we never even talked about it. As far as I’m concerned, it’s over,” Trump said.
The Dollar Index, measuring the greenback’s performance against a basket of six major currencies, climbed 0.2% to approximately 101.17. This positioned it close to its strongest level since early July.
Energy Markets Rally on Rising Middle East Tensions
Brent crude soared 6.24% to reach $78.82 per barrel, marking its second consecutive day of advances. The rally materialized immediately following Trump’s declaration and reports of Iranian strikes targeting American installations throughout the region.
Treasury yields similarly pushed higher. The two-year yield advanced to 4.24%, while the benchmark ten-year yield reached a monthly high of 4.60%. Market observers linked these movements to expectations of elevated energy expenses over the extended term.
Jane Foley, head of FX strategy at Rabobank, said the market has learned to weigh Trump’s comments carefully. “The remarks may be meant to bring the opposition to the table. Nevertheless, they will raise anxiety levels another notch,” she said.
Central Bank Actions and Fed Minutes Draw Attention
Apart from Middle Eastern developments, market participants concentrated on two additional Wednesday events.
New Zealand’s central bank lifted its benchmark rate 25 basis points to 2.5%, matching market forecasts. The RBNZ indicated additional tightening might be necessary to manage inflationary pressures. The kiwi dollar strengthened following the announcement.
The Australian currency also registered modest gains, while the Japanese yen continued facing downward pressure. The dollar advanced against the yen for its fourth straight session, trading near 162.48. This threshold has previously triggered warnings from Tokyo officials regarding potential currency market intervention.
Bank of Japan official Toichiro Asada indicated more definitive evidence of demand-driven price increases is required before Japan pursues additional rate adjustments.
Later Wednesday, financial markets anticipated release of the Federal Reserve’s June policy meeting minutes — the inaugural set under Chairman Kevin Warsh’s leadership. Warsh has already streamlined the Fed’s policy language and omitted his personal rate forecasts, departing from established convention. Nine among 18 Federal Open Market Committee participants recently indicated expectations for at least one additional rate increase this year.
Francesco Pesole, FX strategist at ING, said he expects the minutes to reinforce a hawkish tone, which would support further dollar strength.
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