Forex Today: US Dollar sags to two-month lows as Middle East risk lifts Oil and Gold

The US Dollar Index slipped to two-month lows and hovered below the 100.00 mark, as a combination of weak US economic data, persisting inflation and retail sales concerns weighed on expectations of a Federal Reserve rate hike next month. Iran's senior official announced a shift toward a fully offensive stance, warning of potential escalation in the Strait of Hormuz should diplomacy fail, prompting Crude oil prices to surge over 2% higher and sustaining a strong position for Gold.

The US Dollar proved the strongest against the Japanese Yen, while the Euro held onto gains near 1.1580 after retreating from two-month highs near 1.1614, as the weaker Dollar bolstered the pairing. The British Pound found support in the mid-1.3500s, near three-month highs, ahead of the upcoming UK jobs report on Tuesday. The Australian Dollar traded robustly in the low-0.7100s, while Crude oil prices surged towards the $84.00 per barrel mark, fueled by heightened geopolitical risk stemming from the Middle East tensions.

Gold's rally extended above $4,400, benefiting from the weaker US Dollar and escalating Middle East tensions. The Asian session commenced on Tuesday with Australia's Westpac Consumer Confidence, followed by the European session's primary highlight: the UK labor market report. The Bank of England (BoE) closely monitors Average Earnings, with the ILO Unemployment Rate projected to dip slightly.

German ZEW sentiment surveys and Eurozone data will follow, along with a speech from the European Central Bank's (ECB) Philip Lane. The US session will focus on Building Permits, Housing Starts, Industrial Production, and Pending Home Sales, offering insights into the largest economy's health. New Zealand's second-quarter Producer Price Index (PPI) will conclude the day's trading.

Agustin Wazne, a Junior News Editor concentrating on Commodities and covering Majors for FXStreet, joined the team. The British Pound added to its Friday advance, briefly reaching three-month highs near 1.3570, before easing on Monday. Lower expectations of a Fed rate hike in September contributed to the Greenback's decline, aiding the Cable's bullish momentum ahead of the UK jobs report release on Tuesday.

EUR/USD consolidated its daily gains, above the 1.1500 threshold, following Wall Street's closing bell on Monday. The pair's multi-day bounce was driven by ongoing selling pressure on the US Dollar, as investors reduced bets on Fed rate hikes. Ahead, Germany's ZEW figures will be released on Tuesday, alongside a series of US hard data.

Gold faced some momentum loss, slipping near the $4,400 per troy ounce mark on Monday, following sustained US Dollar weakness amid dwindling bets for further Fed rate tightening later in the year.