US Dollar Index flat lines above 98.00 on fragile Middle East ceasefire

• US Dollar Index holds steady around 98.25 in Friday’s Asian session. 
• Trump expresses optimism about a peace deal with Iran. 
• Markets expect the rates to remain unchanged this year.

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 98.25 during the Asian trading hours on Friday. The DXY trades on a flat note amid uncertainty surrounding a ceasefire between Israel and Lebanon. Traders await the prospects for fresh US-Iran talks this weekend for fresh impetus. 

A 10-day ceasefire between ‌Lebanon and Israel went into effect on Thursday. The uncertainty in the Middle East remains high and could boost a safe-haven currency such as the US Dollar. The Lebanese army claimed on Friday that Israel had committed violations of the ceasefire in Lebanon, including intermittent shelling of several southern Lebanese villages.

On the other hand, US-Iran ceasefire optimism could weigh on the Greenback. A two-week peace deal between the two countries is currently in effect but is due to expire next week. US President Donald Trump said the next meeting between Washington and Tehran could take place over the weekend.

“The markets are in a bit of a consolidation phase because they have already priced in some optimism about the ceasefire being extended earlier in the week,” said Sim Moh Siong, FX strategist at OCBC. “You will need the next catalyst to provide a more directional move. It’s no longer a one-way street for the dollar from here.”

Traders will take more cues about how US Federal Reserve (Fed) officials will tackle war-induced inflation pressures. Fed funds futures showed markets continue to bet that the US central bank will keep rates on hold this year, according to Reuters.