MUFG: The USD - FJElite

The US dollar has continued to trade on a softer footing at the start of this week with the dollar index dosing lower for the fourth consecutive day yesterday. The US dollar was undermined both by the sharp move lower for the price of oil and the continued correction lower for US Al-related equities. The price of Brent dropped sharply by around USD10/barrel encouraged by media reports over the potential for US-lran talks. It was reported that Iran’s President Masoud Pezeshkian said his government has been granted more authority by the country's supreme leader to pursue peace talks. The state-run Islamic republic News Agency cited Pezeshkian as stating "we are striving to resolve the issue through dialogue and. in this regard, the supreme leader has also granted certain powers to the government". The Iranian president didn’t clarify the extent of the new authority or whether it signals a broader shift in their negotiating strategy with the US.

At the same time. President Trump told reporters yesterday that ‘they want to make a deal, and that it could happen'. Vice President JD Vance separately told reporters that "we've had good conversations with the Iranians’ and that “the president and I both feel pretty good about the prospects of potentially coming to a negotiated settlement". While it remains highly uncertain whether a deal can be reached, yesterday's price action does highlight the potential for a sharp move lower in energy prices if there is further positive progress. The case for a stronger US dollar would diminish if the energy price shock started to fade. At the same time, the outcome from the US mid-term elections today could also put a temporary dampener on US dollar upside. According to the final set of polls from the New York Times, and Siena University, the Democrats have moved ahead in almost all of the seven battleground states (Michigan, Texas, Maine, Ohio, Kansas. Alaska & Iowa) that will determine control of the Senate.