USD Strengthens as Hawkish Fed Offsets Iran Deal Optimism, Stocks Rise

US equity markets closed a holiday-shortened week higher, buoyed by an initial Iran peace deal that briefly eased geopolitical tensions and boosted risk appetite. However, the Federal Reserve delivered a more hawkish-than-expected stance, reinforcing dollar strength across major pairs. The hawkish Fed posture suggests interest rates may remain elevated for longer than markets had previously priced in, supporting USD/JPY to the upside and pressuring EUR/USD and GBP/USD lower. The combination of geopolitical de-escalation (prior to the latest Strait of Hormuz developments) and tighter monetary policy expectations created a mixed but ultimately risk-positive environment for US equities, while the dollar benefited from yield differentials. Traders should note that the Iran peace deal narrative has since been overtaken by the Strait of Hormuz closure announcement, which may reverse the week's risk-on gains. Key levels to watch include the DXY dollar index holding above recent support, with attention turning to upcoming Fed speakers and inflation data for further directional cues on rate expectations.