Wall Street closes at a record for the first time since end of January
Investing.com -- The U.S. dollar weakened slightly on Monday, after Iran rejected a ceasefire proposal and President Donald Trump ramped up threats against the country.
At 17:51 ET (21:51 GMT), the US Dollar Index, which tracks the greenback against a basket of six major peers, was down marginally to 99.98.
The euro was largely flat amid a holiday in most European markets for Easter Monday. The Japanese yen USD/JPY was little changed at 159.69.
Trump says Iran is negotiating
De-escalation hopes boosted U.S. equities on Monday, even as Trump ramped up a harsh rhetoric against Iran.
Both the U.S. and Iran have received a framework of a plan to halt hostilities, although Tehran has rebuffed any immediate reopening of the Strait of Hormuz, Reuters reported, citing a source aware of the proposals.
The plan -- brokered by Pakistan following overnight contacts with U.S. and Iranian officials -- would start an immediate ceasefire followed by talks on a broader settlement to be concluded within 15 to 20 days, Reuters reported.
Iran’s state media said the country had conveyed its response to the proposal, rejecting a ceasefire and instead emphasizing the necessity of a "permanent end" to the war.
Iran’s response consists of 10 clauses, state media said, including protocol for safe passage through the critical Strait of Hormuz and the lifting of sanctions.
Axios first reported on Sunday that the U.S., Iran and regional mediators were discussing a potential 45-day ceasefire as part of a two-phase deal that could lead to a permanent end to the war, citing U.S., Israeli and regional sources.
Trump later told reporters at a White House Easter event that Iran had made a proposal and a "significant" one at that, but it was "not good enough."
At a conference following the event, Trump said "we are dealing with them."
"Essentially, they have until 8 o’clock tomorrow night, Eastern Time. But we are dealing with them ... I think it’s going fine, but we’ll have to see," the president said.
Tuesday deadline to reopen Strait of Hormuz
Trump was referring to a Tuesday deadline he has imposed on Iran to make a deal or face U.S. attacks on energy infrastructure. Trump on Sunday threatened Iranian power plants should Tehran not move to unblock the Strait of Hormuz, a critical waterway through which roughly one-fifth of the world’s oil flows.
Trump reiterated the deadline in his press conference.
"This is a critical period ... We’re giving them until tomorrow, 8:00 pm Eastern Time — and after that, they’re going to have no bridges. They’re going to have no power plants. Stone ages," the president said.
Trump had previously imposed a Monday deadline for Iran make a deal and open the strait.
"Whether an actual ceasefire deal is achieved [...] remains to be seen, but a significant escalation (especially one involving thousands of U.S. boots on the ground) is unlikely," analysts at Vital Knowledge said in a note.
The dollar has become a relative safe haven for investors during the ongoing Middle East crisis, powering a steep climb in the greenback since the start of the conflict in late February.
Strong March jobs report
Trackers of the U.S. dollar also digested a much stronger-than-expected March nonfarm payrolls report, published on the Good Friday holiday.
The U.S. Bureau of Labor Statistics said there were 178k jobs added in March, significantly higher than the consensus estimate of 60k. The increase was driven by the end of a strike by healthcare workers and warmer weather.
Still, the reading underscored the see-saw nature of the U.S. jobs market seen so far this year. Nonfarm employment for January was revised up to 160k, while that for February was revised down to a fall of 133k.
But the report also gave watchers of monetary policy and the Federal Reserve some more room to focus on inflation, especially in the wake of spiking oil prices due to the Iran war. A soft reading would have likely boosted interest rate cut bets, weighing on the dollar. The greenback tends to do better in higher rate environments.
"Despite a generally positive response to the latest payroll numbers (our US economist view), we continue to regard U.S. labor market as largely frozen, suspended in an unstable equilibrium, offering no guidance as to the direction of monetary policy or likely health of U.S. consumers," Viktor Shvets, head of global desk strategy at Macquarie, said.
"(Fed chair) Jerome Powell has recently referred to the labor market as being in a ’curious kind of balance’. Whiplashed by erratic trade policies, rapid progression of AI, growing inequalities, and the Iran war, businesses, consumers and policymakers are facing an unprecedented (outside of COVID) conjunction of risks that is bound to impact investment, hiring and firing, with a spillover into real income, consumption and growth," Shvets said.
The spotlight will now turn to inflation, with an update arriving this week in the form of the March consumer price index (CPI) report scheduled for Friday. Crucially, the period will include the Middle East conflict, giving market participants a chance to see the effects of surging oil prices.
Ayushman Ojha and Scott Kanowsky contributed to this article
