US Dollar Index Rebounds as Middle East Hopes Fade, Inflation Data Ahead

The US Dollar Index (DXY) trimmed earlier losses on Tuesday, reversing a decline as fading hopes for a Middle East peace deal spurred renewed demand for the greenback. Traders had been swinging between optimism and caution over a possible US-Iran agreement, but shifting sentiment weighed on the dollar's earlier gains.

Market attention is now turning to upcoming US inflation data, which could influence the Federal Reserve's policy trajectory. A higher-than-expected reading may reinforce expectations of tighter monetary policy, potentially providing further support for the dollar.

Despite the day's rebound, the index remains sensitive to geopolitical developments and economic indicators, with the inflation release likely to be the next major catalyst.