The Federal Open Market Committee (FOMC) and Treasury International Capital (TIC) data did not greatly impact the markets, largely due to uncertainties involving tariffs and oil volatility. The Federal Reserve’s inclusion of two rate cuts in the 2025 median projection appeared modestly dovish. Despite this, the Fed did not express significant concern about growth and unemployment.

TIC data revealed a decrease of $36 billion in foreign US Treasury holdings out of $9 trillion in April. This suggests domestic investors played a bigger role than anticipated in the recent Treasury sell-off. Continued anecdotal evidence points to de-dollarisation, although additional TIC data is necessary for clarity.

Geopolitical Tensions and Market Sentiment

Geopolitical tensions, particularly the potential US action against Iran, are influencing sentiment, with media suggesting possible imminent US military involvement. The USD risk premium is primarily driven by US-induced themes, yet geopolitical and high oil prices may boost the dollar’s appeal. The US dollar remains more stable than energy-dependent alternatives like the euro in this scenario.

Uncertainties surrounding the Bank of England’s decisions, with the bank rate unchanged at 4.25% and some policymakers favouring cuts, also affect trade. Similarly, US Dollar resilience continues, marginally weakening the euro, while geopolitical risks lift gold. Bitcoin hovers around $103,100, with tensions over Iran further affecting perspectives.

The Federal Reserve’s latest projections hinted at a slightly accommodative tilt for 2025. With two rate cuts pencilled in, markets have begun to weigh this shift. Still, Powell and his colleagues did not appear alarmed by either labour markets or economic activity, suggesting they see enough strength in core indicators to pause on deeper easing—for now. It’s not a pivot, and traders should treat it as a caution light rather than an open road.

Looking at Treasury International Capital flows, we noticed a marked reduction—foreign holders cut back $36 billion in April. That’s just a drop in the bucket relative to the overall $9 trillion held, but meaningful in that it underlines the weight of domestic hands in facilitating recent sell-offs. In short, heavy-lifting was done more locally than globally. That said, conviction in the theory that we’re watching a steady de-dollarisation trend needs further data. What we have is fragmented, and not yet enough to define a clear directional bias. But we’ve noted the shift.

There’s also a colder wind blowing in from the geopolitical front. Expectations of a more confrontational US stance on Iran are simmering. References in major publications point to possible near-term military operations, which may be adding layers to the dollar’s premium. For now, flows suggest that investors still prefer to anchor in greenbacks when uncertainty rises, especially in a market still coping with wild oil spikes.

We’ve seen how this contrasts with the eurozone, where reliance on external energy inputs doesn’t play in the currency’s favour when Brent ticks upward. That dynamic remains in place. This acts as a simple lens: whenever there’s a sharp turn in oil, reassess European exposure against the dollar’s tendency to absorb shocks better.

Impact on Metals and Cryptocurrencies

Meanwhile, closer to home, ambiguity from the Bank of England is seeping into intraday reactions. The current 4.25% bank rate has seen pushback among policymakers, with some moving toward a more dovish stance, although actual movement hasn’t materialised. The lack of consensus—not in media talk, but in formal votes—affects short sterling strategies, causing brief but repeatable dislocations. These can be mapped onto yield curve reactions in the front end.

In metals, gold continues to benefit from bunker-style buying, behaving like a pressure valve, while in crypto, Bitcoin’s consolidation around the $103,100 range implies a wait-and-see mode—likely reinforced by doubt around where the next global flashpoint will land. Positioning remains cautious, not ambivalent. Derivatives pricing across all layers should reflect this defensive posture.

We should remain alert for market re-pricings off geopolitical calendar events rather than purely economic indicators. The narrative is more about where risk arises than macro growth, and volatility will cluster around those pressure points. Redirecting focus toward instruments most tethered to geopolitical variables—such as commodity-linked currencies, energy hedges, and safe haven assets—may unlock short-term alpha, if approached with discipline.

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