Bowman Stalls Rate-Cut Hopes with Inflation, Iran Comments

The second signal – a direct reference to a major geopolitical conflict from a Fed official – is rare. It raises the spectre of supply-chain disruptions, energy price spikes, and risk-off capital flows. Gold jumped as safe-haven demand revived. Oil futures ticked higher on the prospect of Persian Gulf instability.

Risk-sensitive currencies, particularly the Australian dollar and New Zealand dollar, came under pressure as traders scaled back exposure to geopolitical risk. The Australian dollar dropped against the US dollar. USD/CHF gained as the Swiss franc bid briefly emerged. The simultaneous influence of higher rates and geopolitical risk creates a tension. The dollar benefits from both. The risk-off channel dampens appetite for higher-beta currencies more than it boosts the dollar versus safe havens. The net effect is a stronger dollar against everything except the yen and franc, where safe-haven bids compete.

The DXY breakout risk assessment from earlier this week gains credibility. If geopolitical tensions escalate further, the dollar could accelerate past recent highs as both a rate and safety play. The EUR/USD profile shows the pair has already closed below its 50-day moving average, a technical signal aligned with the fundamental shift.

The next major test for the dollar will be the next US inflation print. If data shows inflation reaccelerating, the dollar rally extends. If inflation surprises lower, the stalled-progress narrative loses force and rate-cut expectations recover. Until then, Bowman's two-pronged message – stalled inflation plus geopolitical risk – provides a framework favouring dollar longs and gold exposure, while punishing the euro and commodity dollars.