Pakistan’s Foreign Ministry said Thursday that dates have not yet been set for the next round of talks between the United States and Iran, discussions that are expected to focus on turning the current two-week ceasefire into a lasting truce.
Speaking at a briefing in Islamabad, ministry officials said communication channels between Washington and Tehran remain open and coordination is ongoing, but they declined to provide any details on the timing or venue of a second round of negotiations. No schedule has been finalized.
White House sees progress, markets stay calm
The statement from Islamabad came during the European trading session and drew attention in financial circles, but it did not trigger an immediate reaction in currency markets. The US Dollar Index (DXY) was roughly flat around the 98.00 level after trimming earlier losses.
Later, White House Press Secretary Karoline Leavitt confirmed that indirect talks are in progress to extend the current two-week ceasefire, which is due to expire on April 22. She said the administration feels “good about the prospects of a deal.”
This cautious optimism has helped underpin the recent calm in markets. A path toward de-escalation in the Middle East reduces the typical flight to safety that tends to boost demand for the US dollar during periods of geopolitical stress.
Dollar near six-week lows as risk appetite improves
The DXY, which tracks the dollar against a basket of major currencies, is trading near 98.00, down more than 2% since the ceasefire was first announced last week. The index is hovering close to six-week lows as traders rotate towards riskier assets and away from traditional safe havens.
This softer tone in the dollar aligns with its seasonal tendency to underperform in April. Since 2000, the dollar index has finished lower in April about 68% of the time, making it one of the historically weaker months for the currency.
Geopolitical tailwinds ease inflation concerns
Prospects for a more durable ceasefire have also fed into lower energy prices, taking some pressure off inflation expectations that had been weighing on the US Federal Reserve. At the same time, weaker-than-expected Producer Price Index data for March further reduced the urgency for additional policy tightening.
With inflation risks receding at the margin and geopolitical tensions easing, markets now see a high likelihood that the Federal Open Market Committee will leave interest rates unchanged at its April 28–29 meeting. Pricing in prediction markets points to roughly a 97.7% probability that the benchmark federal funds rate remains in the current 3.5% to 3.75% range, which would mark a third consecutive hold.
How Fed policy shapes the dollar
The dollar’s global dominance is tightly linked to US monetary policy. The US currency is involved in more than 88% of all foreign exchange transactions worldwide, with average daily turnover of about $6.6 trillion in 2022, according to market data.
The Federal Reserve’s dual mandate of stable prices and maximum employment leads it to adjust interest rates in response to economic conditions. The Fed typically raises rates when inflation runs too hot and cuts them when growth slows or unemployment rises. Higher rates tend to support the dollar by offering better returns on dollar-denominated assets.
In times of severe stress, such as the 2008 financial crisis, the Fed can employ quantitative easing, purchasing large quantities of bonds and expanding the money supply to maintain credit flows. That added liquidity usually weighs on the dollar. The reverse process, quantitative tightening, involves scaling back bond purchases or reducing the central bank’s balance sheet and often supports the currency by limiting the supply of dollars in circulation.
Softer dollar lifts appeal of non-yielding assets
A combination of steady interest rates and a weaker dollar generally improves the relative attractiveness of assets priced in dollars that do not pay a yield. When the purchasing power of fiat money is not rising and carry returns are stable, the opportunity cost of holding such assets falls, historically providing a more supportive backdrop for them.
The current environment has shifted market sentiment into a clear “risk-on” mode. Capital is moving away from the perceived safety of government bonds and the dollar and towards assets seen as offering higher growth potential, a pattern that is heavily dependent on the continuation of diplomatic progress in the Middle East.
Two-way risks as ceasefire deadline approaches
Despite the present calm, the underlying geopolitical picture remains fragile. The lack of a fixed date for the next round of US–Iran talks highlights how tentative the current ceasefire arrangement still is.
Should negotiations stall or collapse before the April 22 deadline and hostilities resume, traders would likely revert quickly to safe-haven positioning. That would be expected to strengthen the dollar, boost demand for government bonds and put renewed pressure on risk-sensitive assets.
Market participants face a binary set of scenarios in the coming weeks: either back-channel diplomacy delivers a more durable peace framework, extending the current risk-on phase, or tensions flare again, reversing recent trends in the dollar and broader markets. For now, pricing reflects cautious confidence in the former, but the balance can shift abruptly if the diplomatic track falters.
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