Dollar Holds Steady as Sterling Rises Ahead of Burnham's New Cabinet

The dollar remained broadly stable as markets monitored the direction of the US-Iran conflict, while the pound edged higher ahead of new British Prime Minister Andy Burnham's cabinet. The dollar index, measuring the greenback against a basket of six currencies, held steady at 100.78. Iran's Revolutionary Guards announced strikes on US military assets across the Middle East following another night of US airstrikes on Iranian cities. Brent crude futures rose slightly to $88.43 a barrel. Markets have become accustomed to pricing in the risks of the Middle East conflict and expect volatility to remain subdued until an unexpected development occurs. Traders are closely watching who Burnham will appoint as finance minister, with Shabana Mahmood, a centrist, seen as a likely candidate. The US dollar was down 0.14% against the Chinese yuan, as China maintained its benchmark lending rates unchanged for the 14th consecutive month. Against the yen, the dollar held steady at 162.39 in thin liquidity due to Japan's Marine Day holiday. Fed funds futures imply an 85.6% probability of no rate change at the next meeting on July 29, up from 61.5% a month ago.

The dollar's stability reflects optimism that the US can contain the Iran conflict, while sterling's rise highlights expectations for Burnham's cabinet's fiscal policy. The ECB's rate path and Eurozone inflation should be monitored closely, as energy price pressures could intensify in the region.