The US Dollar is still pushing higher, even as oil prices have eased from recent highs. Rising Treasury yields and sticky inflation expectations are driving the move. The DXY has moved above 101 and is up about 2.3% so far this month.
That strength shows up clearly in USD/JPY, which is trading above 161.50. This comes even after the Bank of Japan lifted rates to their highest level since 1995 earlier this month. The bigger force has been the sharp shift in Fed rate expectations. Markets moved from expecting cuts to thinking hikes may return. Much of that change comes from the energy price shock tied to the US-Iran conflict.
The oil risk premium has started to fade after the US-Iran roadmap toward a peace deal was signed in Switzerland at the start of the week. Iranian oil can now be sold under a 60-day US Treasury waiver, and early signs point to more tanker traffic through the Strait of Hormuz. Even so, exact shipment volumes are still unclear. WTI is now around $15 lower than it was at the start of the month.
Still, traders want clearer proof that supply is normalizing before they price oil back to pre-war levels. For now, oil remains driven by headlines, and any fresh diplomatic shift can move prices fast.
Gold is also feeling the effect of the stronger dollar. Oil’s pullback has not weakened the greenback, so gold’s usual inverse link with the USD is holding firm. Expectations for one or more Fed hikes this year are also weighing on the metal, since gold pays no yield. The price has struggled to recover and remains near the lower end of its recent range. Support sits near $4085 and $4035, while resistance is around $4196 and $4360. For the short term, gold looks trapped in a $3800 to $4360 range as long as the dollar keeps its rate-driven momentum.
Tech stocks are under pressure again this week. Part of that comes from profit-taking after a strong run, including fresh record highs in the KOSPI and Nikkei 225. Another concern is whether huge AI spending will translate into solid revenue. Even with that pressure, tech has a strong record of bouncing back after selloffs. Investors still see the sector as one of the best places for long-term earnings and revenue growth. Some rotation into other sectors may continue, and that can be healthy. Recent earnings seasons have also shown that tech stocks still lead on EPS and revenue.
The main market focus this week is Thursday’s US Core PCE report, the Fed’s preferred inflation measure. Markets are watching closely for any sign that a rate hike could arrive in late Q3 or early Q4. A hotter-than-expected reading would likely raise anxiety in an already rate-sensitive market. That would give the dollar more room to climb and could push Treasury yields higher again.
If inflation and growth data keep forcing the Fed toward tighter policy, global equities will face another test. That matters after a year of record highs for the three major US indices, along with the Nikkei and the Kospi in 2026.
For now, US data tied to rates, plus US-Iran headlines and their effect on oil, remain the main drivers for markets.
