The dollar gained strong traction on Monday amid an escalation of geopolitical risks and a rise in treasury yields across the curve.
A sharp escalation in tensions in the Middle East over the weekend affected sentiment and could weigh on risk assets.
Inflation data added to the upward momentum. January’s stronger-than-expected producer price data has complicated the Federal Reserve’s outlook, reinforcing concerns that inflation may prove stickier than anticipated.
At the same time, rising crude oil prices linked to geopolitical instability are feeding into expectations of renewed energy-driven inflation pressures. Markets continue to price two interest rate cuts by year-end and another in 2027.
Looking ahead, direction will hinge on incoming data. Manufacturing PMI figures are due today, Services PMI data midweek, and the labour market report on Friday. Evidence of economic resilience alongside firm price pressures would validate the upward bias in yields and sustain dollar momentum, while de-escalation abroad or softer domestic data could temper the rally.
