USD Strengthens on Fed Hawks While Gold Rallies Amid War Concerns

The US Dollar Index advanced 0.4% to 105.20 as Federal Reserve officials maintained their hawkish stance on inflation, while escalating Middle East tensions drove gold futures 1.2% higher to $2,385. EUR/USD declined 45 pips to 1.0475 as diverging monetary policy expectations weighed on the pair, with the ECB expected to cut rates before the Fed. USD/JPY tested 156.50 resistance as the Bank of Japan maintained its ultra-loose policy despite yen weakness. Recent US inflation data showing core CPI at 3.8% year-over-year supports the Fed's higher-for-longer narrative. The ongoing Iran-Israel conflict has increased demand for safe-haven assets, benefiting both the dollar and gold simultaneously. Technical analysis shows the DXY approaching key resistance at 105.50, while EUR/USD faces immediate support at 1.0450. Traders should monitor geopolitical developments closely as further escalation could trigger significant volatility across major pairs.