Last Updated on 12/08/2026
Dollar steadies as traders await pivotal U.S. inflation reports
The U.S. dollar traded largely unchanged on Tuesday as investors avoided major currency bets ahead of closely watched inflation data that could influence expectations for Federal Reserve policy. Meanwhile, oil prices edged higher after an Iranian official stated that the Strait of Hormuz would remain closed until Washington met Tehran’s conditions.
By 16:31 ET (20:31 GMT), the U.S. Dollar Index, which measures the greenback against a basket of six major currencies, was holding near 99.82.
Focus shifts to CPI and PPI releases
Market attention is firmly centered on the July Consumer Price Index (CPI) and Producer Price Index (PPI) reports due on Wednesday and Thursday. The inflation readings follow a weaker-than-expected U.S. employment report released last Friday, which prompted investors to reassess the outlook for future Federal Reserve interest-rate moves.
Analysts expect both headline and core CPI to show monthly increases after June’s subdued readings, while annual inflation measures are forecast to ease slightly compared with the previous month.
According to José Torres, Senior Economist at Interactive Brokers, core inflation could fall to its lowest level in more than five years if it comes in below expectations at 2.4%, highlighting how broader disinflation trends are being overshadowed by geopolitical risks.
Torres also noted that headline inflation is projected to remain notably higher than core inflation due to elevated food and energy costs. He argued that a lasting resolution to tensions in the Middle East could further accelerate the decline in overall inflationary pressures.
Torres added that a resolution to the ongoing geopolitical conflict could swiftly eliminate concerns about additional interest-rate hikes. In his view, inflation would move much closer to the Federal Reserve’s 2% target by the end of the year, shifting policymakers’ attention toward protecting the labor market from further weakening rather than combating price pressures.
Oil jumps as Iran ties Hormuz reopening to U.S. concessions
In the Middle East, oil prices climbed nearly 2% on Tuesday after surging around 5% in the previous session, as uncertainty surrounding the Strait of Hormuz continued to support energy markets.
Investors have been closely monitoring developments since U.S. officials, including President Donald Trump, repeatedly suggested that discussions over reopening the strategic waterway were underway. Iran, however, has denied engaging in direct negotiations with Washington, stating that its talks have been conducted exclusively through Oman.
Conflicting statements from both sides have added to market uncertainty. While U.S. officials have maintained that the strait remains open to commercial shipping, Iranian authorities have argued that it is effectively closed. The absence of a clear breakthrough toward a peace agreement has contributed to recent gains in oil prices.
Iran and Oman are reportedly working on a framework for managing the strait, with Qatari officials indicating that negotiations have reached an advanced and sensitive stage. At the same time, reports have suggested that Washington and Tehran may be edging closer to a potential arrangement, with Oman and Pakistan continuing to play key mediating roles.
Tehran has insisted that any reopening of the Strait of Hormuz depends on Washington fulfilling commitments outlined in a previously negotiated interim peace framework, including lifting sanctions, ending naval restrictions, and providing compensation for war-related damage. The U.S. has responded with demands of its own, underscoring the ongoing deadlock.
Iranian officials reiterated that the waterway would remain closed until the country’s conditions are met, signaling that tensions remain far from resolved.
Shipping activity through the strait has also slowed markedly. Data from maritime analytics firm Kpler showed vessel crossings declining sharply over the weekend, highlighting the disruption to one of the world’s most important energy transit routes.
Yen retreats while Australian dollar gains after RBA decision
The Japanese yen weakened modestly against the U.S. dollar, surrendering additional gains made following last month’s major currency intervention. USD/JPY rose 0.1% to 159.31, moving closer to the psychologically important 160 threshold.
Meanwhile, the Australian dollar edged 0.1% higher to $0.7059 after the Reserve Bank of Australia left its benchmark interest rate unchanged at 4.35%, in line with market expectations.
The RBA noted that disruptions to global oil supplies are adding to inflationary pressures and that higher fuel costs appear to be filtering through to a broader range of goods and services. As a result, policymakers expect inflation to remain elevated for an extended period.
The central bank acknowledged that tighter financial conditions and slowing economic activity are helping to moderate demand. However, it emphasized that inflation remains well above target and is not expected to return to the midpoint of its target range until late 2027, with risks still skewed to the upside.
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