USD Dominates on Hawkish Fed as Middle East Thaw Pressures Oil

The U.S. dollar is maintaining its dominant position across major pairs, buoyed by a hawkish Federal Reserve stance that continues to widen policy divergence with other major central banks. Fed officials have signaled a willingness to keep interest rates elevated for longer, reinforcing yield differentials that favor the greenback. Meanwhile, geopolitical developments in the Middle East are contributing to a notable easing of risk premiums, as peace talks progress and reduce supply disruption fears, pushing oil prices lower. The decline in crude oil has implications for commodity-linked currencies such as the Canadian dollar and Norwegian krone, which face additional headwinds. Central bank divergence remains a key theme, with the ECB and other institutions leaning toward more accommodative policies in contrast to the Fed's restrictive posture. Traders should watch for continued USD strength against currencies where central banks are on a divergent easing path, while monitoring oil-sensitive pairs for further downside pressure as geopolitical risks recede.