Dollar Slips as U.S., Iran Agree on Ceasefire Extension; Inflation Stays Elevated

The U.S. dollar weakened on May 28, 2026, following reports that the U.S. and Iran have reached a 60-day ceasefire memorandum of understanding, easing Middle East tensions. The dollar index (DXY) fell 0.2% to 99.02. The agreement, still awaiting President Trump's approval, includes restoring unimpeded shipping in the Strait of Hormuz, lifting the U.S. maritime blockade on Iranian ports, and Iran's commitment not to develop nuclear weapons, according to Axios and Fox News. Separately, the Federal Reserve's preferred inflation gauge showed the core personal consumption expenditures price index rose 3.3% year-over-year in April, the highest since November 2023, while the headline PCE climbed 3.8%, both well above the central bank's 2% target. U.S. first-quarter GDP growth was revised down to an annualized 1.6% from 2.0%. The combination of slowing growth and sticky inflation limits policy flexibility, pushing rate-cut expectations further out. The yen strengthened slightly, with USD/JPY down 0.1% at 159.28, remaining near levels that prompted suspected Tokyo intervention earlier in May.