The gradual shift of capital away from safe havens by investors, driven by cautious optimism about a ceasefire between the US and Iran, combined with record gains in the US stock market, has put significant pressure on the dollar.
At the close of trading on May 8th, the US dollar index – a measure of the greenback's strength against a basket of six major currencies – fell 0.4% to 97.877, nearly touching the low recorded just before the outbreak of hostilities. Overall for the week, the index lost 0.3%.
The slowdown in the US dollar has provided momentum for a surge in several major currencies. Specifically, the euro rose 0.5% to 1.1780 USD per euro. The British pound also edged up 0.6% to 1.3626 USD per pound. Similarly, the Japanese yen recovered slightly to 156.695 yen per USD, benefiting from falling US bond yields and ongoing warnings of intervention from Japanese officials.
The main driver of the USD's decline is the shift in demand for risky assets related to the Middle East hotspot. The currency market is optimistic as the fragile ceasefire between the US and Iran remains in place. The US has proposed a phased reopening of the Strait of Hormuz and lifting the blockade of Iranian ports, paving the way for future nuclear negotiations.
However, the situation remains fraught with risks as regional media reported that Iran had just seized an oil tanker, triggering retaliatory military actions by the US against Tehran's missile launch sites.
Analysts believe the market is placing a big bet on the possibility of the strategic Strait of Hormuz reopening soon. According to Paola Rodriguez-Masiu, an oil analyst at energy research firm Rystad Energy, the announcement of the agreement would immediately push oil futures prices down. However, she also noted that global crude oil flows will take six to eight weeks to fully normalize due to the specifics of the shipping market.
Meanwhile, Pavel Molchanov, an expert at the financial services firm Raymond James, predicts that even a partial agreement would be enough for traffic through the Strait of Hormuz to gradually return to normal. If the downward trend continues, retail gasoline prices in the US could cool down in the next one to two weeks.
The disruption to shipping via the Hormuz sea route has driven Brent crude oil prices to their highest level since March 2022 last week, forcing refineries around the world to frantically draw oil from their reserves to make up for the shortfall.
A report released on May 6th by the U.S. Energy Information Agency (EIA) showed that U.S. crude oil and fuel inventories continued to decline last week. Specifically, U.S. crude oil inventories fell by 2.3 million barrels to 457.2 million barrels, lower than the 3.3 million barrel decrease forecast by experts.
Meanwhile, news regarding the Russia-Ukraine conflict did not significantly impact the market. In a May 8th post on the social media platform Truth Social, US President Donald Trump announced that Ukraine and Russia had agreed to a three-day ceasefire starting May 9th.
Besides geopolitical factors, the macroeconomic picture of the US economy is also sending mixed signals. A report from the US Department of Labor showed that the economy created 115,000 new jobs in April 2026, far exceeding the forecast of 65,000 positions. The unemployment rate also remained stable at 4.3%. However, the growth rate of average hourly earnings was lower than expected.
Another noteworthy piece of information is that the US consumer confidence index for May, surveyed by the University of Michigan, unexpectedly plummeted to a record low of 48.2, while inflation expectations for the next year cooled to 4.5%.
The combination of weak consumer spending data and the S&P 500 reaching an all-time high significantly reduced demand for holding USD cash. Analysts at Ballinger Group believe that the volatility of employment data in recent months will cause the market to pay less attention to a single report. Overall, macroeconomic trends continue to reinforce the scenario that the US Federal Reserve (Fed) will remain inactive in the near future.
On May 6th, Chicago Fed President Austan Goolsbee warned that overly optimistic expectations about a boom driven by artificial intelligence (AI) could cause the US economy to overheat, forcing the Fed to raise interest rates instead of cutting them.
Speaking at a conference hosted by the Milken Institute, Goolsbee said that if businesses and consumers increase investment and spending before productivity truly improves thanks to AI, inflationary pressure could increase. He said, “In that scenario, the Fed might not necessarily need to lower interest rates. On the contrary, the Fed might have to raise interest rates.”
According to Goolsbee, if AI truly delivers on its promises, the technology could help the economy become wealthier. However, he believes caution is still needed, and that close monitoring of the situation is necessary.
The increase in labor productivity driven by AI and the likelihood of this trend continuing are becoming a major topic of debate among policymakers and financial markets. Some argue that lessons from the 1990s show that faster productivity growth can help lower interest rates by reducing inflation. Kevin Warsh, who will soon become the new Fed Chairman, believes that AI will boost productivity so strongly that it will drive inflation down, creating conditions for the Fed to lower interest rates.
Meanwhile, senior officials at the European Central Bank (ECB) have repeatedly warned this past week about the risk of inflation if the Strait of Hormuz remains blockaded. The institution's leaders have stated that monetary policy will have to be tightened if the energy price shock spreads, threatening medium-term price stability.
Peter Kazimir, the governor of the central bank of Slovakia and a supporter of tight monetary policy, asserted in an editorial on May 4th that a rate hike in June 2026 is "almost unavoidable".
Mr. Kazimir argued that the ECB must prepare for a prolonged period of widespread price increases accompanied by significantly weaker growth across the Eurozone. The President of the German central bank, Joachim Nagel, also supported this view, stating that such a move would be necessary if the outlook for inflation and economic growth did not improve significantly.
These strong statements have prompted markets to price in a 79% chance that the ECB will raise interest rates by 25 basis points at its June meeting, thereby further strengthening the euro.
Source: https://baotintuc.vn/thi-truong-tien-te/dong-usd-sut-giam-tuan-thu-hai-lien-tiep-20260509110402064.htm
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