The US dollar and Treasury yields could come under pressure as sentiment shifted after indications that the conflict in the Middle East could move toward a quicker resolution than previously expected, said Hani Abuagla, a senior market analyst at XTB Mena, a regulated online trading brokerage based in Dubai. 

The expectations of a decrease in tensions triggered a pullback in oil prices, which in turn softened immediate concerns about inflation pressures, he stated.

However, the broader geopolitical backdrop remains fragile, and any renewed escalation could quickly push oil prices, the dollar, and Treasury yields higher again. 

Monetary policy expectations could continue to react to the developments in the oil market and its impact on inflation. Expectations around the timing of interest cuts could continue to change, he added.

Looking ahead, Abuagla said the attention now shifts to US inflation data. "February’s CPI report on Wednesday and the January PCE data later in the week are expected to act as key catalysts, shaping expectations for Federal Reserve policy and driving the next directional move in both currency and bond markets," he added.-TradeArabia News Service