Forex News
- USD/CAD holds above 1.3950, with seven-month highs at 1.4020 on sight.
- Lower Oil prices are weighing on the Canadian Dollar, offsetting the impulse from risk appetite.
- Market volatility remains subdued with the Federal Reserve decision on tap.
The Canadian Dollar (CAD) is trading without a clear bias against the US Dollar (USD) on Monday. The USD/CAD pair oscillates above 1.3950, with year-to-date highs at 1.4020 within a relatively short distance, as US Dollar weakness, stemming from the risk-on market, has been offset by the negative impact of declining Oil prices on the CAD.
Moderate appetite for risk dominates the market at the week's opening, following news that the US and Iran have reached a memorandum of understanding that will end the three-month war and reopen the Strait of Hormuz.
Lower Oil prices hurt the CAD
Investors have reacted by paring back their long positions in the safe-haven US Dollar, which is showing the weakest performance among the major currencies on Monday. The Canadian Dollar, however, has been unable to capitalise on the Greenback’s weakness, weighed down by the decline in Crude prices. Oil is Canada’s main export, and the fall in Brent prices, which are trading at three-month lows at the time of writing, is widely expected to curb Canada's foreign trade revenues.
Apart from that, traders are likely to be looking from the sidelines ahead of the US Federal Reserve meeting on Wednesday. The bank is expected to stand pat on rates, and the main interest of the event will be the bank's rate and economic projections, and the new Chairman Kevin Warsh’s press release to detect changes in the forward guidance.
In Canada, last week, the Bank of Canada (BoC) left interest rates unchanged and highlighted the challenges posed by high inflation combined with sluggish economic growth. The CAD fell below 1.4000 against the US Dollar for the first time since last November.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Deutsche Bank reviews performance of Oil, bonds, European equities and precious metals from late February to last Friday during the conflict. The bank notes Oil and AI-related trades surged, while bonds, most European equities and precious metals fell. It adds that today’s combination of lower Oil and bond yields with rising equities and precious metals fits this broader context.
Conflict drives divergent asset moves
"After numerous false dawns, a deal has finally been struck."
"The story is largely self-explanatory: a fascinating interplay saw oil and AI-related trades soar, while bonds, most European equities, and precious metals experienced declines."
"This context makes this morning's market reaction—falling oil and bond yields alongside rallying equities and precious metals—perfectly understandable."
"All eyes are now on Anthropic and the US government to see what agreements emerge."
"Assuming the US/Iran deal is signed and no notable setbacks occur in the 60-day negotiating period for broader issues, then AI will undoubtedly reclaim its position as the dominant market narrative."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
According to BNY’s Bob Savage, the Dollar is trading within a broader risk-on environment after the U.S.-Iran agreement to reopen the Strait of Hormuz eased energy supply concerns. FX markets are highly sensitive to policy divergence, with USD trends reassessed alongside JPY and KRW. Investors are focused on central bank decisions and higher-for-longer rate risks.
Dollar tracks global policy shifts
"This has reduced the immediate energy supply risks and supported a broad risk-on move across equities, bonds and currencies."
"FX markets remain sensitive to policy divergence, with attention on JPY, KRW and USD trends as investors reassess carry trades and intervention risks."
"Despite the positive geopolitical backdrop, investors remain focused on central bank policy, global growth trends and whether improving sentiment can overcome persistent concerns around inflation, rates and capital flows."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
According to the June 11-15 Reuters poll, all 35 economists predicted that the Swiss National Bank (SNB) would keep its policy rate at 0% this week. 28 economists who responded with forecasts until the end of 2026 saw rates staying at 0% the entire year. Only four economists expected one or two quarter-point rate rises in 2027.
SNB FAQs
The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.
The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.
The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.
MUFG’s Lee Hardman observes that the Japanese Yen has not benefited from lower energy prices, with USD/JPY still above 160.00 ahead of the BoJ meeting. He notes record short Yen positions and expects a fully priced 25 bps BoJ hike, while warning that persistent Yen weakness could prompt further intervention, especially if falling energy prices and softer Fed expectations support a stronger Yen.
Yen shorts build before policy decision
"The yen has failed to benefit so far from the ongoing drop in energy prices with USD/JPY continuing to trade above 160.00 ahead of this week’s BoJ policy meeting."
"The latest IMM report revealed that leveraged funds have significantly increased short yen positions since the conflict started."
"Short yen position increased for the fifth consecutive week to 9th June and have increased by almost four times since late February reaching."
"It is the largest short yen position since the start of July 2024 which was then followed by the heavy liquidation of yen-funded carry trades in the summer of 2024 after the BoJ hiked rates in July 2024 and the Fed cut rates in September."
"If the yen remains weak, it will keep pressure on Japan to intervene again to provide support."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
European Central Bank (ECB) Governing Council member and Governor of the National Bank of Slovakia (NBS) Peter Kazimir seems to be joining his peers in highlighting the need for further monetary policy adjustments on the upside despite the United States (US) and Iran reaching a peace framework.
Remarks
It is increasingly evident that monetary policy has more work to do.
Energy shock is seeping into the economy, requires ECB's vigilance and preparedness to respond.
I am not comfortable with outlook for core inflation above 2% even with more tightening.
I lean towards frontloading work that needs to be done, but need to be agile and responsive to incoming information.
Even with US-Iran peace framework, damage in Middle East cannot be undone overnight.
Market reaction
No immediate response seen in the Euro (EUR) after ECB Kazimir's comments. During press time, EUR/USD trades 0.37% higher to near 1.1610 amid an upbeat market mood.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
National Bank of Canada (NBC) discusses USD/CAD, noting the pair has been consolidating and may remain range-bound. The bank highlights that recent moves reflect shifting expectations for Federal Reserve and Bank of Canada policy. Their analysis suggests limited directional conviction, with USD/CAD likely to oscillate within established technical levels over the coming days.
USD/CAD seen consolidating in range
"The USD/CAD pair has been trading sideways in recent sessions, reflecting a lack of clear directional catalysts as markets reassess the relative policy outlooks of the Federal Reserve and the Bank of Canada."
"We continue to expect USD/CAD to trade within a broad range in the near term, with upside limited by resistance near recent highs and downside supported by demand on dips."
"A sustained break outside of this range would likely require a material shift in interest rate expectations or a significant move in oil prices, neither of which appears imminent at this stage."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold extends the rebound that started on Thursday from the $4,024 area, gaining nearly 3% on Monday.
- Markets welcome a framework agreement between the United States and Iran aimed at ending the war.
- A weaker US Dollar and expectations surrounding the Fed meeting are also supporting precious metals.
Gold (XAU/USD) trades around $4,340 at the time of writing on Monday, up 2.86% on the day and extending the rebound that began on Thursday from the $4,024 area. The precious metal is reaching its highest level in a week as investors reassess the implications of the newly announced agreement between the United States (US) and Iran.
Financial markets are reacting positively to news that Washington and Tehran have reached a framework agreement designed to end the war. US President Donald Trump stated that the Strait of Hormuz will be reopened as part of the deal, while Iran’s Deputy Foreign Minister also confirmed the announcement. According to several media reports, the ceasefire that has been in place since April is expected to be extended, allowing both sides to continue negotiations.
The announcement has triggered a sharp improvement in market sentiment. US equity index futures are rising between 1% and 2%, while Crude Oil prices are falling significantly as investors anticipate a gradual normalization of global energy flows following the reopening of the Strait of Hormuz.
At the same time, the US Dollar (USD) remains under pressure. The US Dollar Index (DXY) is down around 0.3% and trades near 99.50 after opening the week with a bearish gap. The weakness of the Greenback is providing additional support for Gold, making the metal more attractive for buyers using other currencies.
Investors are also focusing on the Federal Reserve (Fed) monetary policy meeting later this week. Before that, markets will closely monitor the release of the Fed of New York’s Empire State Manufacturing Survey and US Industrial Production data. Any signals regarding the health of the US economy and the future path of interest rates could influence Gold’s direction in the coming days.
Despite the improvement in the geopolitical backdrop, some sources of caution remain. Lebanese media continue to report Israeli strikes in southern Lebanon after the announcement of the agreement, while the full text of the deal has not yet been published. This lingering uncertainty is helping to sustain safe-haven demand for the yellow metal, which continues to attract investors seeking protection against geopolitical risks.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- AUD/USD holds gains at the upper range of the 0.7000s, buoyed by risk appetite and lower Oil prices.
- Risk-sensitive assets rally on Monday amid news of a US-Iran peace agreement.
- The pair has broken above trendline resistance, hinting at a deeper bullish correction.
The Australian Dollar (AUD) trims previous gains against the US Dollar (USD) on Monday, as markets ponder the peace agreement between the US and Iran, ahead of a central bank-busy week. The AUD/USD pair has pulled back from session highs at 0.7090 but remains positive on daily charts, with technical indicators showing moderate bullish momentum.
Investors celebrated the announcement of a peace deal between the US and Iran and the ensuing decline in Oil prices during Monday’s Asian and early European sessions. The risk-sensitive Aussie was one of the best performers, reaching 10-day highs at 0.7090 before pulling back to the 0.7070 area at the time of writing.
Markets, however, are reluctant to place large AUD/USD directional bets ahead of monetary policy decisions by the Reserve Bank of Australia (RBA) on Tuesday and the US Federal Reserve (Fed) on Wednesday. The Australian central bank is expected to stand pat after three consecutive rate hikes, although another hike remains in the cards. The Fed, on the contrary, is widely expected to leave rates on hold, with the new chairman, Kevin Warsh, likely to adopt a more dovish stance than former chief Jerome Powell.
Technical Analysis: Consolidates at near-term highs
AUD/USD trades at 0.7072, maintaining a constructive near-term bias as it holds above the descending trendline resistance from early June highs. The Relative Strength Index (RSI) sits in the upper mid-range, while the Moving Average Convergence Divergence (MACD) remains in positive territory, together suggesting that bullish momentum is still intact.
On the topside, immediate resistance emerges at the 50% Fibonacci retracement near 0.7090, followed by the 61.8% retracement around 0.7113, with stronger caps at the horizontal barrier of 0.7145, where June 4, and 5 highs meet the 78.6% Fibonacci retracement.
Initial support is seen at the area between 38.2% retracement near 0.7060 and the reverse trendline, now around 0.7050. A clear break below those levels would put bears back in control and expose Friday's lows, at 0.7020, and the two-month lows, near 0.6980, hit last week.
(The technical analysis of this story was written with the help of an AI tool.)
Societe Generale’s Kenneth Broux and colleagues note Brent has dropped sharply after the US–Iran MoU and reopening prospects for the Strait of Hormuz, with prices down 35% from April peaks but still above pre-war levels. They highlight technical supports at $82/81, $78 and $75, and maintain a Brent forecast of $80 by end-2026 as oil flows normalise by January 2027.
Oil reprices on US Iran breakthrough
"Brent crude traded down to $82.7/b overnight, adding mild bull steepening impetus to govies as central bank rate hike expectations are pared back on both sides of the Atlantic."
"Technical levels are situated around $82/81, $78 and $75."
"Our house view assigned a probability of 35% for end of June re-opening of the SoH, oil flows normalising by Jan-27 and Brent trading at $80 by year-end."
"SG Brent forecast $80/b by end-2026 based end of June re-opening, oil flows normalise by Jan-27."
"The 200-DMA around $78 could be an important support."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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