Key HighlightsThe greenback remained unchanged, hovering between 100.72 and 100.76 amid heightened Middle East uncertaintiesMilitary exchanges between Washington and Tehran persisted following the breakdown of a ceasefire agreement reached a month priorSterling gained ground as Andy Burnham positioned himself to assume the role of UK Prime MinisterFutures markets indicate an 85.6% likelihood that the Federal Reserve will maintain current interest rates at its upcoming July 29 policy meetingBeth Hammack from Cleveland’s Federal Reserve branch cautioned that rate increases might still be necessary should inflationary pressures persistThe US dollar traded within a tight band on Monday as market participants balanced continuing military confrontations between the United States and Iran against emerging diplomatic signals from Iranian officials. Foreign exchange markets demonstrated relative stability notwithstanding the tense geopolitical environment.The benchmark dollar index, tracking the American currency’s performance versus a basket of six major global currencies, remained anchored around the 100.72 to 100.76 level. The greenback had retreated modestly following a three-session safe-haven surge fueled by escalating Middle Eastern tensions.US Dollar Index (DX-Y.NYB)Military Exchanges Between Washington and Tehran Persist Following Truce BreakdownThe United States and Iran engaged in military operations for a ninth straight evening. The hostilities resumed after a temporary ceasefire arrangement, signed approximately one month earlier, fell apart.JUST IN: Earlier today, despite an active U.S. military escort, Iran’s IRGC reportedly struck the Malta-flagged oil products tanker KAVOMALEAS in the Strait of Hormuz, according to UKMTO.MarineTraffic last placed the tanker in the Persian Gulf, underway after departing Fujairah… pic.twitter.com/fZsq4KKi3z— The Hormuz Report (@HormuzReport) July 20, 2026The confrontation has concentrated around the strategic Strait of Hormuz, a critical waterway for international petroleum transport. These disruptions have elevated energy commodity prices and intensified concerns regarding inflationary pressure.Brent crude momentarily surged past the $90 per barrel threshold before retreating to approximately $88.16. Iranian authorities subsequently indicated willingness to pursue diplomatic channels aligned with their national priorities, which helped ease some market apprehension.According to Nick Rees, who leads macro research at Monex Europe, financial markets have become increasingly accustomed to the current risk landscape. He suggested that volatility would probably continue declining unless unexpected developments emerge to surprise market participants.Pound Strengthens as British Political Leadership TransitionsThe British currency appreciated 0.13% to reach $1.3470 as Andy Burnham readied himself to succeed Keir Starmer in the Prime Minister’s office. This shift within Labour Party leadership captured forex traders’ attention.Financial markets reacted favorably to indications that Home Secretary Shabana Mahmood would be appointed Chancellor. Market participants view her as a political moderate, and the prospect of a financially prudent leader managing the Treasury Department appealed to investors.Chris Turner, who heads global markets at ING, cautioned that Britain’s constrained fiscal circumstances suggest the incoming cabinet might need to pursue tax revenue enhancements to support their policy agenda.The eurozone’s common currency remained essentially flat at $1.1441. Market participants are positioning themselves before Thursday’s European Central Bank policy announcement, where interest rates are anticipated to stay at 2.25%.Federal Reserve Policy Meeting Commands Market Attention on July 29Derivatives markets tracking Fed funds rates assign an 85.6% probability to the Federal Reserve maintaining its current rate policy at the July 29 gathering. This represents a significant increase from the 61.5% likelihood priced in just one month earlier.On Friday, Cleveland Federal Reserve President Beth Hammack indicated that interest rate increases might still prove necessary should inflation demonstrate continued resilience. Her remarks contribute to an expanding policy discussion within the central bank as Chair Kevin Warsh approaches his second policy meeting.The American dollar also declined 0.17% relative to China’s yuan following Beijing’s decision to keep its primary lending rate unchanged for a fourteenth consecutive month.The post US Dollar Remains Stable Amid Iran Tensions and Ahead of Federal Reserve Decision appeared first on Blockonomi.