The US dollar did not react to the news of the Israeli-Iranian clash. Some are even relieved at the lack of signs of conflict escalation.

The US Dollar still maintains a position near multi-month highs but put the brakes on its bullish rally at the start of Monday's New York session (15/April). The world's superpower currency is still buoyed by the Fed's recent change in interest rate expectations, but the US Dollar Index (DXY) corrected from the 106.00 range to the 105.90s as the news was written.

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Last weekend, Iran launched attacks on several Israeli military facilities in retaliation for Israel's attack on the Iranian consulate in Damascus. Iran later said that it now "considers the matter settled".

Various countries are trying to reduce the tension between the two camps. Russia called on all sides to exercise restraint. John Kirby, White House spokesman, also said that "the US wants to see tensions ease," although Israel's response will remain up to the government of PM Benjamin Netanyahu.

Market participants did not react strongly to the news of the Israel-Iran clash. Some are even relieved at the lack of signs of conflict escalation. The US dollar is still a favorite safe haven amid the conflict, so the currency's muted rally indicates that markets do not expect a major escalation in the near future.

"There are signs of relief around markets following Iran's missile barrage on Israel over the weekend", Shaun Osborne, chief FX strategist at Scotiabank, said.

Market participants are still focused on speculation around the Fed's interest rates. The release of US inflation data last week has pushed back expectations of an early Fed rate cut from June to September 2024. However, markets will continue to monitor US economic data and Fed officials' speeches for additional confirmation.

"It is a data-light week so all eyes will turn to Fedspeak where more than a dozen voting members on the FOMC are likely to emphasise patience after last week's blowout CPI print," said Nicholas Chia, Asia macro strategist at Standard Chartered Bank.