Expectations for peace in the Middle East are leading to a sell-off of the US dollar.
The main beneficiary of the conflict’s resolution appears to be gold.
The bulls in the EURUSD pair have launched a counterattack following Donald Trump’s announcement that the conflict in the Middle East could end within 2-3 weeks. The US President urged Gulf countries to take back their oil by forcefully opening the Strait of Hormuz.
The White House’s willingness to withdraw from the region aligns well with the TACO strategy – Trump Always Drifts, which investors adopted after April 2025, when initial tough tariffs were followed by reductions and delays, sparking a rally in stock indices and weakening the dollar.
History is repeating itself, so the more than 1.3% rally in EURUSD appears justified as investors bet on falling Brent prices and improved global risk appetite. The global economy would suffer less severely in this scenario than if the conflict were to drag on, and signs of a slowdown in US GDP should soften the Fed’s position in the coming months.
The outlook for Europe is also changing. In March, the eurozone CPI index jumped from 1.9% to 2.5% due to food and energy prices, but hopes have recently grown that the acceleration in consumer prices may be temporary. Without tightening monetary policy, the currency bloc’s economy will be able to avoid recession and begin to gradually recover, while falling oil and gas prices will improve trade balance expectations. This is good news for the euro.
The decline in the dollar and US Treasury yields allowed bears in the USDJPY pair to launch a counterattack. Japan’s Ministry of Finance was prepared to act on all fronts, including the currency and commodity markets. Verbal interventions have cooled speculators who had increased net shorts on the yen to a two-month high.
The main beneficiary of the imminent resolution of the armed conflict in the Middle East could be gold. The precious metal is ready to rise above $4,700 per ounce due to speculative reactions to Donald Trump’s comments. Previously, it was actively sold off by central banks for necessary liquidity to support economies, as well as by investors to meet margin requirements on stocks and bonds.
However, investors and traders should remain cautious, as the US administration has often played the role of the good cop in falling markets and the bad cop when markets are closed.
