The dollar sank on Friday due to the Justice Department’s decision to cease its investigation into Federal Reserve Chair Jerome Powell and signs of potential progress in ending the U.S.-Israeli war with Iran.

“The market’s reading this as a little bit dovish,” said Noah Buffam, director of FICC strategy at CIBC Capital Markets in Toronto, as the DOJ probe concludes, leading to the confirmation of President Donald Trump’s central bank nominee, Kevin Warsh.

Warsh favors reduced mean and median inflation estimates, which are lower than Powell’s core inflation numbers, according to Buffam. It “could lead to him trying to get through more cuts than Powell would have.”
Fed funds futures traders now predict a 38% chance of a rate cut by year-end, up from 23% on Friday.

The dollar index declined 0.28% to 98.55, while the euro rose 0.27% to $1.1714. The dollar index is expected to rise 0.32% and the euro to fall 0.41%. The Japanese yen rose 0.19% to 159.4 per dollar versus the dollar. Sterling increased 0.42% to $1.3523.

The dollar plummeted as Iran’s Foreign Minister Abbas Araqchi was scheduled to discuss peace negotiations with the US in Islamabad on Friday, but sources claim he will not meet with U.S. negotiators there.