The US Dollar is experiencing a downturn, while crude oil prices drop, and the Israeli Shekel strengthens by approximately 2%. The sentiment towards risk is improving at the start of a busy week for the markets.

The DXY Index is projected to fall within the 90-95 range. Middle East tensions remain, but the situation remains contained for now. Comments from President Trump indicated a lack of immediate US involvement, leaving future developments uncertain.

Key Events This Week

Attention this week is on the Bank of Japan, Federal Reserve, Swiss National Bank, and Bank of England policy decisions, alongside the G7 meeting in Canada. Only the Swiss National Bank is expected to ease policy with a quarter-point cut, and communication on the policy outlook will be important, especially for the US Federal Reserve.

Ongoing trade discussions are expected in the G7, with any progress potentially boosting positive risk sentiment. The USD experienced a brief lift from recent geopolitical risks but broader downward pressures persist. The DXY’s technical downtrend continues, with a future drop anticipated without further geopolitical tensions.

With the US dollar showing persistent weakness and oil prices edging lower, the tone across global assets at the start of the week has shifted away from defensive postures. Risk appetite appears to be creeping back, helped in part by a relatively stable geopolitical picture for now. The move in the Shekel—gaining roughly 2%—adds a layer of confirmation that investors are easing back towards higher-yielding or traditionally risk-aligned currencies.

Looking to the broader macro picture, the DXY Index—widely used as a benchmark for dollar strength—remains locked in a downward channel, now targeting the 90–95 band. That projection still stands, barring any external shocks that could push traders back into the safety of the greenback. With recent tensions in the Middle East not escalating further, and with Trump’s remarks suggesting no pressing military involvement, we see no reason for an abrupt change in direction.

This week serves as something of a decision point for markets. Policy updates are due from the Federal Reserve, Bank of Japan, Bank of England, and Swiss National Bank, each carrying its own implications. Most eyes are on the Federal Reserve’s stance—how Powell communicates the rate path may hold more weight than any move in rates themselves. While no change is expected from the Fed or the others aside from Switzerland, it’s the forward guidance that may prompt repositioning.

Implications For The Swiss National Bank And G7 Summit

The Swiss National Bank stands alone in its expected cut, a modest quarter-point move. Their previous reluctance to intervene too heavily, combined with inflation trending lower, opens space for them to act now. We should anticipate increased attention on currency strength for both the SNB and the Bank of Japan, especially if their respective currencies continue to firm against the dollar.

Meanwhile, the G7 summit in Canada returns focus to trade. If there’s any traction or hint of reduced friction—particularly involving the United States and its industrial peers—markets may further tilt into risk. That sort of resolution, even partial, could dent the dollar’s limited safe-haven bid and extend the prevailing downtrend.

It’s also worth pointing out that the recent spike in the USD, though brief, was more knee-jerk than fundamentally anchored. As that sentiment fades, we’re moving back into a phase where interest rate expectations and growth differentials set direction—both of which continue to lean against the dollar for now.

Volatility may pick up leading into the central bank announcements, but positioning should remain alert to moves in yields, particularly in longer-term Treasuries. Any repricing there will likely ripple into FX markets, determining whether the USD finds a temporary floor. There’s also a growing chance that expectations for further Fed rate cuts this year could become more entrenched, pressuring the greenback through the summer.

All told, market participants should remain wary of sudden headlines—be they from the geopolitical front or unexpected shifts in tone from central bankers. However, in the absence of a fresh shock, the broader macro setup points to further weakness in the dollar, slight support for energy-importing currencies, and continued narrowing of central bank divergence, driven mostly on the dollar side.

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