Forex News

• Dow Jones futures fall as US-Iran peace hopes fade after Tehran rejected claims of allowing IAEA inspectors.
• Traders adopt caution due to hawkish sentiment surrounding the Fed's policy stance.
• A sharp technology-sector sell-off during Monday’s regular US session weighed heavily on broader equity markets.

Dow Jones futures fall by 0.72%, trading near 51,750 during the European hours on Tuesday. However, S&P 500 futures are down by 1.4% near 7,430, while Nasdaq 100 futures decline 2.29%, trading near 29,950 at the time of writing.

US stock futures declined as initial market optimism over a potential US-Iran peace agreement quickly faded. The shift in sentiment occurred after Tehran flatly denied a claim by US Vice-President JD Vance stating that Iran would allow International Atomic Agency (IAEA) nuclear inspectors back into the country. Following the first round of bilateral talks in Washington aimed at permanently ending the conflict, Iran's foreign ministry clarified to state media that the government had made "no new commitments" regarding its nuclear inspection policies.

Compounding these geopolitical headwinds, investors remained heavily focused on a hawkish policy outlook from the Federal Reserve (Fed). This restrictive stance from central bankers effectively canceled out any positive momentum that might have otherwise resulted from temporary signs of easing US-Iran tensions. The combination of monetary policy caution and geopolitical friction ultimately carried over from the previous session's losses on Wall Street.

During Monday's regular US trading session, a sharp sell-off in technology shares dragged down the broader markets, causing the S&P 500 and the Nasdaq 100 to slide by 0.37% and 1.32%, respectively. In contrast, the Dow Jones managed to buck the trend with a modest gain of 0.29%.

Major mega-cap technology stocks heavily led the broader market downturn. The tech-heavy decline was punctuated by SpaceX, which plunged 16.4% to mark its third consecutive losing session following the unveiling of a new bond offering.

Moreover, Alphabet fell 5%, Amazon dropped 4.8%, Broadcom slid 4.7%, and Microsoft lost 3.2%, while Meta Platforms also shed 2.3% of its value. Despite the sector-wide rout, semiconductor manufacturer Micron stood out as a major exception, jumping 6.8% after the company announced a new strategic partnership with AI firm Anthropic.

Deutsche Bank’s Early Morning Reid highlights that the Japanese Yen remains under pressure, trading close to 40‑year lows versus the US Dollar. After briefly spiking, USD/JPY approached levels last seen in 1986, prompting speculation about imminent Bank of Japan intervention following an emergency online meeting between Japan’s finance minister and the US Treasury Secretary, although the pair is currently trading quietly.

Speculation grows over BoJ intervention risk

"Another G7 country in the news is Japan and this morning the currency is fairly flat after seeing a strong spike yesterday afternoon London time after it got within a whisker of hitting 40-year lows."

"It hit 161.93 versus a low of 161.96 in July 2024."

"Beyond that you have to go back to December 1986 to see weaker levels."

"There was speculation over imminent BoJ intervention with JNN reporting an online emergency meeting between Finance Minister Katayama and US Treasury Secretary Bessent yesterday."

"This morning it's hovering remarkably quietly at 161.60 given all the noise."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Preliminary United Kingdom flash S&P Global Services Purchasing Managers’ Index (PMI) declines at a faster pace to 48.7 in June from 49.3 in May. The Services PMI was expected to arrive higher at 50.0, a figure that separates expansion from contraction.

The overall private business activity contracts at a faster pace due to further contraction in the service sector activity and a slowdown in the manufacturing sector.

The Composite PMI contracts further to 49.4 from 49.7 in May. The Manufacturing PMI drops to 53.1 vs. 53.6 estimates and the prior release of 53.9.

“A disappointing June ‘flash’ PMI indicates that the economy contracted for a second successive month, albeit at only a 0.1% rate and merely flat-lining over the second quarter as a whole. “Price pressures remain elevated as companies point to the energy shock and supply squeeze from the war in the Middle East as exacerbating existing cost pressures from government policies," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said.

Market reaction

The selling pressure on the British Pound (GBP) extends against the US Dollar (USD) after the UK PMI data release. At press time, GBP/USD trades 0.26% lower at around 1.3215.

• Gold comes under renewed selling pressure amid the underlying USD bullish sentiment.
• The USD stands tall near a one-year high amid the Iran uncertainty and the hawkish Fed.
• Traders look to the flash US PMIs for some impetus ahead of the US PCE on Thursday.

Gold (XAU/USD) breaks below the $4,100 mark, hitting its lowest level in nearly two weeks during the first half of the European session on Tuesday amid a bullish US Dollar (USD). Despite positive signals from US-Iran peace talks, investors remain skeptical over a final deal. This, along with the US Federal Reserve's (Fed) hawkish tilt, lifts the USD to a fresh high since May 2025, which continues to undermine the precious metal.

Mediators Qatar and Pakistan said on Monday that the first round of negotiations between the US and Iran – aimed at securing a comprehensive agreement to end the ongoing conflict – concluded with encouraging progress. The two mediating countries said in a joint statement following talks in Switzerland that both sides have agreed on a roadmap towards reaching a final deal within 60 days. The US followed through on a key commitment and temporarily lifted sanctions on Iranian oil exports.

Adding to this, the US will mediate another round of talks to end clashes in Lebanon between Iran-backed Hezbollah and Israel. The market optimism, however, remains capped amid conflicting US-Iran messages. US Vice President JD Vance said that Iran agreed to admit nuclear monitors and is prepared to accept extensive weapons inspections as part of ongoing diplomatic efforts. However, Iran's foreign ministry told state media that Tehran had made no new commitments on nuclear inspections.

Meanwhile, US President Donald Trump said preventing Iran from obtaining a nuclear weapon outweighs the potential economic consequences of prolonged military action. Moreover, Iran's chief negotiator and parliamentary speaker, Mohammad Bagher Ghalibaf, told state media on Tuesday that the Strait of Hormuz will remain under Tehran's administration and would not return to the pre-war status. This keeps geopolitical risk premium in play and underpins the safe-haven buck.

On the monetary policy front, the Fed signaled last week that it will need to raise policy rates this year if inflation remains sticky. Furthermore, Chicago Fed President Austan Goolsbee acknowledged that inflation is heading in the wrong direction and running well above the central bank's 2% target. This reaffirms bets that the Fed will raise borrowing costs at least once, either in September or in December, which lends additional support to the buck and weighs on the non-yielding Gold.

Traders now look forward to the release of the flash US PMIs, due later during the North American session. This, along with speeches from influential FOMC members, will drive the USD and provide some impetus to the Gold. The focus, however, remains on the US Personal Consumption Expenditures (PCE) Price Index and the final Q1 GDP print on Thursday. Apart from this, the US-Iran headlines might continue to infuse volatility in the financial markets and produce meaningful trading opportunities.

XAU/USD 4-hour chart

Gold seems vulnerable as fresh breakdown below $4,100 comes into play

From a technical perspective, the XAU/USD pair keeps a bearish near-term tone, beneath the 100-period Simple Moving Average (SMA) on the 4-hour chart. However, the Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) has turned marginally positive with the signal line just above zero, hinting at tentative relief. That said, the Relative Strength Index (RSI) at 37.17 remains in weak territory and suggesting that any bounce would still unfold within a corrective context.

On the topside, the 100-period SMA at $4,311.19 is the first meaningful resistance and needs to be reclaimed on a sustained basis to ease immediate downside pressure and open the way for a more constructive recovery phase. Moreover, traders may continue to treat the current zone as a vulnerable consolidation area, with failure to challenge $4,311.19 likely to keep Gold exposed to further pullbacks on the four-hour horizon.

(The technical analysis of this story was written with the help of an AI tool.)

The Canadian Dollar (CAD) is facing renewed pressure as USD/CAD extends its rally to 14-month highs, with Societe Generale noting a decisive shift in momentum and RBC highlighting that domestic inflation remains skewed by volatile energy costs.

Societe Generale sees no pullback signals after USD/CAD breaks long-term downtrend

Societe Generale analysts note that the USD/CAD pair has accelerated after crossing a descending trend line in place since last year, marking a shift in momentum.

With the November peak at 1.4130-1.4150 now serving as support and upside objectives stretching toward 1.4285-1.4335, the Canadian Dollar could face further downside against the Greenback.

The pair is now attempting to break out of a broad multi-month range. The move is somewhat stretched; however, there are no clear signals of a meaningful pullback yet.

RBC says energy prices mask subdued underlying inflation pressures

The Royal Bank of Canada (RBC) notes that Canadian headline inflation accelerated to 3.2% year-over-year in May, though the increase was heavily concentrated in energy, airfares, and food costs.

The subdued core readings suggest the Bank of Canada may not feel pressure to respond aggressively to headline inflation, leaving the Canadian Dollar without a clear interest-rate tailwind even as the figures climb.

The May report suggests headline inflation remains heavily influenced by energy prices while underlying inflation trends continue to move broadly in line with the Bank of Canada's inflation target.

Canadian Dollar outlook weakens

Societe Generale's technical outlook and RBC's inflation analysis both suggest little tailwind for the Canadian Dollar. The former sees the USD/CAD uptrend extending toward fresh highs, and the latter indicates that inflation pressures remain contained once volatile categories are stripped out.

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• EUR/GBP pulls back from session highs at 0.8635, which keeps the pair close to monthly lows at the 0.8620 area.
• Eurozone preliminary PMIs have shown a moderate improvement in business activity in June.
• The Pound remains steady with investors at ease with PM Starmer's exit.

The Euro (EUR) pares previous gains against the British Pound (GBP) on Tuesday. The EUR/GBP pair has depreciated nearly 0.6% over the last two days and remains below 0.8635, unable to take off from levels just above monthly lows, despite above-expectations Eurozone HCOB Purchasing Managers Index (PMI) figures and the resignation of UK Prime Minister, Sir Keir Starmer.

Eurozone preliminary PMI data for June revealed that manufacturing activity slowed down to 51.3, from 51.6 in May, yet slightly above the 51.2 expected, while business activity in the services sector improved to 48.9 from 47.7, beating expectations of a 48.1 reading. The Composite PMI has risen by a whole point, to 49.5 from 48.5, also above the market consensus of a 49.1 reading.

Data from Germany released earlier on the day, however, was somewhat softer, putting some negative pressure on the Euro. German Manufacturing PMI stalled in June, at 50, after a 50.1 reading in the previous month, while services activity contracted at a 46.8 pace, from 48.1 in May, against market expectations of a mild improvement to 48.7. The Euro ticked lower following the data release.

In the UK, in a few minutes, S&P Global will release the preliminary PMIs for June. Services activity is seen edging higher to 50, from 49.3 in May, while the manufacturing sector is expected to have slowed down to 53.6 in June from 53.9 in May.

Apart from that, the Pound has remained fairly steady after the resignation of the UK Prime Minister Keir Starmer. Investors seem at ease on the prospects of an orderly handover of power, with Manchester Mayor Andrew Burnham emerging as the best-positioned candidate and Labour Party leaders racing to enter in the next cabinet.

Societe Generale analysts Michael Haigh and Jeremy Sellem say a tentative United States (US)–Iran truce has eased immediate oil supply fears, driving a sharp fall in Brent and WTI as markets price a restart of Hormuz flows. Still, they argue that the Brent curve remains elevated, reflecting a persistent risk premium and slow normalisation of Gulf exports.

Risk premium persists despite price drop

"A tentative U.S - Iran truce has been agreed and has provided the market with some relief over immediate supply concerns, but uncertainty still hangs over both the durability of the deal and the upcoming negotiation period. Ongoing regional tensions, including Israeli strikes in Lebanon and delays to planned talks - highlight how fragile the backdrop remains."

"Even so, oil markets have reacted decisively: prompt Brent and WTI have dropped by $25–30/bl since early May, with traders increasingly pricing in a restart of Hormuz flows and the return of around 12mn b/d of disrupted Middle East supply, including Iranian exports. Despite this, the longer end of the curve remains elevated."

"In the near term, Gulf production is set to recover only gradually as flows through the Strait increase in stages, with a full normalisation likely to take several months or longer, a subject we have discussed at length. The slow ramp‑up reflects expectations that tanker operators will avoid pre‑war routes until mine clearance is completed, maritime control is clarified, and disputes over transit fees are resolved."

"Taken on balance, the strait appears slightly less congested than a month ago once reopened. Holding our other assumptions constant, we now estimate ~45 days to return to pre-war flow levels."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)