Forex News

• Waller says hot core CPI could force hike consideration.
• Oil surge revives inflation risks after renewed Hormuz attacks.
• CPI and Warsh testimony could decide Gold’s next break.

Gold price (XAU/USD) plunges on Monday after remarks by Federal Reserve (Fed) Governor Christopher Waller, who revealed that if the Consumer Price Index (CPI) rises this week, the Fed should consider interest rate hikes. The XAU/USD drops nearly 3% below $4,000 as traders eye a retest of the yearly low near $3,900.

XAU/USD dives as Waller ties CPI upside to rate hikes.

Governor Waller stated that a high reading in core inflation “would force near-term consideration of a rate hike.” Despite being hawkish, he still sees it as credible that inflation could reach the 2% goal without higher rates and stated that the labour market is closer to the Fed’s maximum-employment goal.

In the meantime, geopolitics continued to drive Gold prices. The US and Iran exchanged fire over the weekend despite signing a memorandum of understanding (MOU) that intended to keep the ceasefire going. 

Tehran’s attacks on shipping vessels prompted retaliation from the US. US CENTCOM confirmed the attacks on more than 100 military targets, aimed at dismantling Iran’s forces near the Strait of Hormuz.

Iran then attacked gulf region nations that host US bases. Tehran said over the weekend that it had closed the Strait of Hormuz to tanker traffic. Energy prices have jumped since the resumption of hostilities amid fears of a supply disruption, with the US crude Oil benchmark, Western Texas Intermediate (WTI), rising nearly 6% on Monday to $75.70.

Given the backdrop, investors had priced in 33 basis points of Fed tightening toward the end of the year, according to Prime Terminal data.

Catalysts for the Gold price

Ahead this week, the release of US inflation data and Fed Chair Kevin Warsh's testimony in front of the US Congress could be the main drivers of XAU’s price action. A rise in inflation and a hawkish Warsh could set the table for a rate hike, sooner rather than later.

XAU/USD technical outlook: Gold drops below $4,000 on Fed's hawkish tilt

Price action shows that the series of successive lower highs and lower lows is being respected, with Gold poised to continue its downtrend. Bears continued to gather momentum as measured by the Relative Strength Index (RSI), which is approaching oversold territory.

All that said, XAU/USD first support would be the year-to-date (YTD) low of $3,941. A breach of the latter will expose the October 28, 2025 swing low of $3,886 ahead of dropping toward the $3,500 mark.

For a bullish continuation, Gold must surpass the $4,000 figure, followed by a downslope resistance trendline at around $4,170. Above the latter, the $4,200 psychological level looms.

• WTI trades near $75.00, up close to 5% on the session, after rebounding from an early low at $72.53 on renewed Strait of Hormuz escalation.
• Trump reinstated the naval blockade on Iranian shipping and attached a 20% levy to all cargo the United States allows through the waterway.
• The Strategic Petroleum Reserve sits at its lowest level since 1983, stripping the market of its buffer against the next disruption.

Crude Oil is repricing the death of a framework rather than any single missile exchange. West Texas Intermediate trades near $75.00, up close to 5%, with Brent near $80.00, after Trump declared the United States will reinstate its blockade of Iranian shipping and collect 20% of the value of every cargo it allows through the Strait of Hormuz. Barely a week ago the barrel had bled back to pre-war levels near $67.00 as the market priced three weeks of partial normalization; it has now un-priced nearly all of it.

A toll both sides swore was illegal

The memorandum of understanding (MOU) signed in mid-June explicitly barred Tehran from charging commercial ships for passage, a clause Washington spent weeks defending as principle. Oman filed its position at the United Nations' shipping agency, the International Maritime Organization (IMO), that transit through an international strait cannot be tolled, and the IMO's secretary-general said only days ago that charging for Hormuz passage has no legal basis. Every word of that case was aimed at Iran's fee plans; on Monday, Washington photocopied them.

The doctrine is collector-agnostic, which is the detail the announcement ignores. The law of the sea does not care whose navy runs the toll booth, so the market is not truly pricing a 20% levy; it is pricing the fact that neither combatant now accepts a rules-based route back to normal traffic, which turns the strait from a war-risk story with an expiry date into a revenue dispute with none.

The market already pays the fee

Freight is where the toll already exists. Chartering a tanker to lift a cargo from inside the strait to Asia costs roughly double the rate for the same voyage starting outside it, according to shipping-market estimates, with war-risk insurance premiums stacked on top of every transit. Traffic through the waterway runs at roughly a third of its normal pace, and Iranian forces fired warning shots at two ships attempting the passage on Monday morning. Monday's strikes also reached Khuzestan, Iran's main producing province, so the risk now runs on both sides of the ledger, barrels blocked at the strait and barrels hit at the source.

Tehran's own messaging does half the work. Its Strait Authority declared passage unfeasible until stability returns while its diplomats advertised a safe corridor through the same water, and shippers reading both statements sensibly conclude that the only reliable policy is the one priced into their insurance.

An emergency reserve with an emergency of its own

The Strategic Petroleum Reserve (SPR) sits at 319.5 million barrels as of the week ending July 3, its lowest level since April 1983, drained by weekly draws near 6 million barrels under a 172 million barrel pledge made alongside a coordinated International Energy Agency release of 400 million barrels. The stockpile holds less than half its capacity, and Trump conceded at the G7 that without the June deal the reserve was roughly four weeks from running dry.

The commercial side offers no cushion either. Total US inventories including the SPR sit at 734 million barrels, the lowest since 1984; commercial stocks have fallen for ten straight weeks; the hub at Cushing holds under 20 million barrels, near the level where the facility struggles to move Crude Oil out to refiners; and refineries run above 96% utilization into peak driving season. The promised 200 million barrel refill over the coming year quietly adds a new source of demand under the tape.

The week hands the barrel two more tests

The June Consumer Price Index lands Tuesday at 12:30 GMT, with consensus looking for a 0.1% monthly decline on the headline and a deceleration to 3.8% YoY. Monday's energy move arrives too late for June's data but rewrites what the July and August prints are allowed to look like, and the Federal Reserve Chair testifies before Congress at 14:00 GMT the same day with an inflation shock forming in real time.

Wednesday's government inventory data then shows whether the reserve draws and the ten-week commercial slide extended into July. Another large draw against a throttled strait would confirm the squeeze, while a surprise build is the one datapoint that could cool the bid without a peace headline.

Levels and bias

Resistance: The session high at $75.07 caps the day so far; above it, the 200-day Exponential Moving Average at $77.25 is the first real test, with the 50-day at $80.21 behind it, and both still slope lower after the spring collapse from the May peak at $107.35.

Support: The early low at $72.53 is the near boundary and guards the $70.00 handle; beneath that, the pre-war shelf near $67.09 is the level a genuine de-escalation would target.

Bias: Higher. The daily Stochastic Relative Strength Index is curling up from the mid-30s, the strait runs at a third of capacity, and the buffer that used to cap these squeezes now sits at a 43-year low; dips toward $72.53 are for buying, and only a daily close below that level puts the $70.00 handle back in play.

WTI spot 5-minute chart

• AUD/USD trades lower as escalating US-Iran tensions weigh on the risk-sensitive Aussie.
• Trump said the Strait of Hormuz would remain open under US protection, while Iran rejected Washington’s role and warned of its military response.
• Investors await China’s Q2 GDP and activity data, alongside US June CPI, with softer US inflation potentially limiting further USD strength.

AUD/USD trades lower near 0.6930 on Monday, retreating from an opening level of around 0.6950 as escalating tensions between the United States (US) and Iran bolster the safe-haven US Dollar (USD) and weigh on the risk-sensitive Australian Dollar (AUD).

US President Donald Trump said the Strait of Hormuz would remain open “with or without Iran” and announced the reinstatement of a naval blockade targeting Iranian shipping. Trump also declared that the US would become the “Guardian of the Hormuz Strait” and said Washington would seek reimbursement at a rate of 20% on cargo passing through the waterway to cover security costs.

Iran rejected Trump’s remarks, with the country’s top joint military command saying that the US had no role in determining the future of the Strait. Iranian officials warned that continued US intervention could trigger further incidents in the global Oil and Gas sector, while Iran's Revolutionary Guard maintained that Tehran would continue asserting control over the strategic route.

The confrontation has pushed Oil prices higher and increased concerns that rising energy costs could keep global inflation elevated. This backdrop supports demand for the Greenback while limiting appetite for currencies linked to global growth, including the Aussie.

Investors will now turn their attention to Chinese trade and activity data, given Australia’s close economic relationship with China. China’s second-quarter Gross Domestic Product (GDP), out early Tuesday, is expected to expand 4.5% YoY, down from 5%, while quarterly growth is forecast to slow to 0.9% from 1.3%. Industrial Production is expected to improve slightly to 4.6%, while Retail Sales are projected to fall 0.1%, compared with the previous 0.6% decline.

On the US side, June Consumer Price Index (CPI) inflation on Tuesday is forecast to ease to 3.8% YoY from 4.2%, with the monthly reading expected to fall 0.1% after rising 0.5%. Core CPI is projected to remain unchanged at 2.9% YoY and 0.2% MoM.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6934. The pair holds fractionally above the 100-period Simple Moving Average (SMA) at 0.6930 but remains capped by the 20-period SMA at 0.6940, leaving the near-term tone broadly neutral with a slight topside constraint. Horizontal resistance levels clustered just above price, together with a Relative Strength Index (RSI) hovering near 48, suggest consolidative conditions rather than a clear directional push for now.

On the topside, initial resistance is seen at the 20-period SMA around 0.6940, followed by the horizontal barriers at 0.6938 and 0.6944, with a stronger cap emerging near 0.6948. On the downside, immediate support is provided by the 100-period SMA at 0.6930, with the next horizontal floor near 0.6928, and a sustained break below this band would expose a deeper corrective phase within the broader consolidation.

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

• USD/CHF rises to its highest level since June 25 amid renewed tensions in the Middle East.
• The Swiss Franc underperforms as SNB intervention risks offset safe-haven demand.
• Traders turn their attention to Tuesday's US CPI report and Fed Chair Kevin Warsh's congressional testimony.

The Swiss Franc (CHF) weakens against the US Dollar (USD) on Monday as traders react to renewed hostilities in the Middle East. At the time of writing, USD/CHF trades around 0.8126, up 0.50% on the day and marking its highest level since June 25.

The pair advances despite modest strength in the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.13, up 0.17% on the day.

The United States (US) and Iran exchanged missile and drone attacks over the weekend, while Tehran claimed that it had once again closed the Strait of Hormuz, pushing Oil prices higher and fuelling inflation concerns.

While geopolitical uncertainty and expectations of a Federal Reserve (Fed) rate hike later this year keep the US Dollar supported, traders remain hesitant to push it higher ahead of Tuesday’s US Consumer Price Index (CPI) data and Fed Chair Kevin Warsh’s congressional testimony, which could offer fresh clues about the interest rate path.

The Swiss Franc has failed to attract sustained safe-haven demand despite heightened geopolitical uncertainty. The currency has depreciated by more than 5% against the US Dollar since the US-Iran war broke out in late February.

The Swiss Franc also faces pressure from the Swiss National Bank’s (SNB) increased willingness to intervene in the foreign exchange market to curb excessive appreciation. Foreign exchange transaction data published on June 30 showed that the SNB purchased CHF 3.94 billion worth of foreign currency in the first quarter of 2026.

Rabobank Senior FX Strategist Jane Foley noted, “Last week SNB President Schlegel repeated the warnings that the central bank was ready to intervene in the market if needed.”

Foley added, “For now, we expect that the SNB’s focus will remain on emphasising that FX intervention is a policy tool with the aim of dissuading speculative buying and preventing the CHF from appreciating.”

BNY’s Geoff Yu highlights that Emerging Markets (EM) equity positioning is heavily skewed toward South Korea and Taiwan, with the rest of EM seeing historically low allocations. China’s weakness and poor EM data have already driven valuations to price in disinflation and weak growth. Yu argues that adding EM exposure ahead of any recovery offers a more attractive risk‑reward profile than current positioning implies.

EM positioning skewed to chip leaders

"Rotation away from EM chip leaders is becoming a more powerful allocation theme. Semiconductor-related stocks in South Korea fell heavily again overnight, while Taiwanese peers also struggled to benefit from solid earnings. There is now significant scope for convergence in absolute positioning terms."

"Our positioning data, which measure asset holdings relative to total global equity holdings, show that EM equity allocations are being heavily skewed by South Korea and Taiwan. Excluding these two markets, the EM equity share of global positioning is barely above 4% – the lowest level in three years and down almost a fifth over that period."

"Data in China and much of EM remain poor, but positioning and valuations already appear to reflect strong disinflation, weak growth and limited earnings momentum. Adding exposure ahead of recovery therefore offers a better risk-reward profile, whether the catalyst comes from cyclical improvement or stimulus."

"The bottom line is that market positioning implies there is no earnings growth in emerging markets outside chips. That looks too pessimistic if any recovery impetus emerges."

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

• US-Iran hostilities lift Oil, boosting Dollar and Treasury yields.
• June CPI data could reset Fed tightening expectations.
• Burnham cabinet uncertainty keeps Sterling exposed to fiscal-risk premium.

The Pound Sterling begins the week on a lower note, as over-the-weekend developments in the Middle East fueled inflation expectations due to the rise in Oil prices. At the time of writing, the GBP/USD trades at 1.3369, down over 0.20%.

GBP/USD slips as Middle East attacks revive inflationary expectations

The constant exchange of attacks between the US and Iran triggered a flight to safe-haven assets, bolstering the Greenback. The US Dollar Index (DXY), which tracks the buck against a basket of six currencies, is up 0.18% at 101.14.

In addition, US Treasury yields are rising as high energy prices are increasing the likelihood of higher US interest rates. Traders had fully priced in a 33-basis-point increase toward the end of the year, according to Prime Terminal data.

Meanwhile, the US economic docket is absent on Monday, as traders await the release of the Consumer Price Index (CPI) data for June on Tuesday. Economists estimate that headline CPI will dip -0.1% MoM, down from a 0.5% increase, while core CPI is projected to remain unchanged at 0.2% MoM.

In the UK, the docket was absent, though last week the Bank of England (BoE) Chief Economist Huw Pill said that interest rates need to rise in the year ahead. Money markets had priced in 33 basis points of BoE tightening by the end of 2026.

In the meantime, uncertainty about the cabinet of the incoming Prime Minister, Andy Burnham, could be a headwind for Sterling. Although he and his team pledged to current Chancellor Rachel Reeves' fiscal rules, a sudden shift could send UK Gilts soaring if the markets demand a higher risk premium in the case that fiscal spending grows.

GBP/USD price forecast: technical outlook

In the daily chart, GBP/USD trades at 1.3379, retaining a capped tone as it holds below the latest Simple Moving Average (SMA) from the triple set at 1.3391 while remaining under the broader downward resistance trendline anchored by a break level near 1.3498. The mildly positive Relative Strength Index (RSI) around 54 hints that downside pressure is not aggressive, yet the pair still trades beneath these key reference levels, suggesting rallies are vulnerable while those resistances remain intact.

On the topside, immediate resistance is seen at the SMA from the triple cluster around 1.3391, with the downward resistance trendline’s break area near 1.3498 acting as a stronger cap if buyers extend a bounce. On the downside, structural support is derived from the broader upward support trendline rooted near 1.3159, where a break would expose a deeper bearish extension. Holding above this floor would keep the pair in a wider consolidative phase despite the current overhead barriers.

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

• DJIA trades near 52,525, down 0.2%, after a push to 52,840 unraveled on fresh Strait of Hormuz headlines.
• Trump reinstated the naval blockade on Iranian shipping and attached a 20% levy to all cargo the United States escorts through the waterway.
• June inflation data and congressional testimony from the Federal Reserve Chair land Tuesday, with Crude Oil up more than 5% into the print.

Risk aversion set Monday's tone, and the Dow Jones Industrial Average wore it better than most of its peers; the index trades near 52,525, down 117 points or 0.2%, while the Nasdaq Composite sheds 1% and the S&P 500 gives back 0.4%. The gap between those numbers is the day's real story, and it runs straight through the Strait of Hormuz.

A blockade with a business model

The weekend supplied the escalation, and Monday supplied the invoice. Tehran attacked a commercial vessel transiting the Strait late last week, Washington answered with strikes on Iranian targets on Saturday, and Iran retaliated against United States (US) facilities across several Gulf states while declaring the waterway shut to traffic. Trump disputed the claim on Sunday, insisting the lane stays open to commercial shipping.

Monday's announcement converted that military posture into commercial policy. Trump declared on social media that the United States is reinstating what he calls the Iranian blockade, a cordon he says stops only Iranian ships and their customers, and styled America the "guardian of the Strait". As compensation for the job, Washington will collect a 20% reimbursement on all cargo it allows through. The detail lands with a certain irony, since last month's ceasefire framework explicitly barred Tehran from charging commercial ships for exactly this passage.

Crude Oil writes the discount rate

Crude Oil rendered the fastest verdict, with West Texas Intermediate (WTI) futures jumping more than 5% to trade above $75 and Brent futures rising 5.3% toward $80 per barrel. Equities read the same tape as an inflation problem wearing a geopolitical costume; a supply chokepoint with a new toll regime feeds directly into energy and goods costs at the precise moment the market wanted confirmation that disinflation was back on script.

The index's intraday path tells the story in miniature. A mid-afternoon surge carried the average to the session high at 52,840.68 before the blockade language crossed the wires, and the entire move unravelled within the hour; the index now sits nearer the early-session low at 52,477.31 than the peak it printed earlier in the afternoon, and is on track for a modest daily loss.

The Dow's relative resilience is structural rather than heroic. A price-weighted average tilted toward industrials, healthcare, and financials absorbs a semiconductor rout far better than its capitalization-weighted peers, which is the entire reason Monday's damage stops at 0.2% here while the tech-heavy benchmarks bleed multiples of that.

Semiconductors pay the toll first

The concentrated selling landed on the market's most crowded trade, which is what happens when consensus positioning meets a headline it cannot model. SK Hynix (SKHY) trades 7% lower in its second United States session after a 13% debut pop on Friday, Micron (MU) is down 6%, Sandisk (SNDK) sheds 10%, and Seagate (STX) loses 6%, with Advanced Micro Devices (AMD) 4% lower alongside Intel (INTC).

The drawdown arrives despite, or perhaps because of, the bullish scaffolding underneath the group. One brokerage strategist argued in a Monday note that hyperscaler capital spending plans will be reaffirmed and keep rising through 2028, with artificial intelligence mentions across all 11 sectors up 98% YoY; winners carrying that much consensus are precisely what gets sold when a tape demands cash in a hurry. The money-centre banks trade lower too, ahead of quarterly results that begin landing this week, with consensus pegging second-quarter S&P 500 profit growth above 23% YoY.

Tuesday stacks a disinflation print against an energy shock

The June Consumer Price Index (CPI) lands Tuesday at 12:30 GMT, with consensus looking for a 0.1% monthly decline on the headline and a deceleration to 3.8% YoY from 4.2%; the core measure is seen at 0.2% MoM and holding at 2.9% YoY. That report was drafted as the week's clean disinflation story, and Monday's Crude Oil move complicates the sequel; a fresh energy shock will not appear in June's data, but it rewrites what the July and August prints are allowed to look like.

The Federal Reserve (Fed) Chair follows at 14:00 GMT with the first of two congressional appearances this week, and the backdrop gives lawmakers plenty to work with. The committee held at 3.75% last month, scrubbed its easing bias, and marked the dot plot hawkishly. Rate futures now assign roughly one-in-five odds to a hike at the late July meeting against effectively nothing for a cut. Retail Sales on Thursday at 12:30 GMT rounds out the week's red-band docket.

Levels and bias

Resistance: The session high at 52,840 is the first ceiling, and Monday's sharp rejection there gives the level teeth; beyond it, the July peak at 53,333 is the only structure left above the market.

Support: The early-session low at 52,477 guards the 52,000 handle; beneath the round number, the 50-day Exponential Moving Average (EMA) at 51,181 has contained every daily pullback since April and remains the trend arbiter.

Bias: Lower. The daily Stochastic Relative Strength Index is rolling over from overbought territory, the afternoon failure at 52,840 shows sellers responding to headlines rather than levels, and the blockade is a fee schedule with no off-ramp priced in; rallies are for selling below 52,840, and a daily close under 52,477 opens the 52,000 handle.

Dow Jones 5-minute chart

• Gold falls as renewed Middle East tensions lift Oil prices, reviving inflation concerns.
• Higher interest rate expectations continue to weigh on the non-yielding metal.
• XAU/USD struggles below the Bollinger mid-band, with sellers eyeing the $4,000 support level.

Gold (XAU/USD) starts the week on the back foot as renewed tensions in the Middle East lift Oil prices and bring inflation concerns back into focus, reinforcing expectations of a Federal Reserve (Fed) interest rate hike later this year.

At the time of writing, XAU/USD trades around $4,011, down 2.63% on the day, marking its lowest level since July 1.

The US and Iran exchanged missile and drone attacks over the weekend. Washington struck southern Iran, while Tehran targeted US military facilities across the Gulf.

US President Donald Trump said in a Truth Social post that the strait “is OPEN, and will remain OPEN, with or without Iran.” Trump added that the US would act as the “guardian” of the Strait and be reimbursed at a rate of 20% on all cargo shipped through the waterway.

The US Dollar (USD) and crude Oil prices opened the week higher, putting pressure on the precious metal. WTI trades around $74.50, up over 4% on the day. 

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.14 after briefly slipping below 101.00 earlier in the day.

The prospect of higher interest rates remains a key headwind for Gold. “Stabilizing US labor market conditions and sticky inflation will keep fed funds rate pricing hawkish,” analysts at Brown Brothers Harriman said.

Brown Brothers added that markets have fully priced in a 25-basis-point (bps) rate hike by year-end and nearly 50 bps of tightening over the next twelve months.

Higher borrowing costs generally weigh on Gold by increasing the opportunity cost of holding non-yielding assets.

With the economic calendar largely empty on Monday, traders now turn their attention to the US Consumer Price Index (CPI) data due on Tuesday. Fed Chair Kevin Warsh’s congressional testimony will also be closely watched for fresh clues about the central bank’s interest rate outlook.

Technical analysis: XAU/USD stays under pressure with $4,000 in focus

On the daily chart, XAU/USD maintains a bearish bias, trading below the 20-day Bollinger Band middle line near $4,116. The Relative Strength Index (RSI) stands around 38, remaining below the neutral 50 threshold and reinforcing the bearish outlook.

Meanwhile, the Average Directional Index (ADX) near 37 indicates that the broader downtrend remains well-defined, suggesting recovery attempts could remain limited unless Gold reclaims the Bollinger mid-band.

On the topside, initial resistance emerges at the 20-day Bollinger SMA around $4,116, followed by a horizontal cap at $4,200 and then the upper Bollinger Band near $4,290 with a stronger barrier at $4,400.

On the downside, immediate support is aligned with the $4,000 horizontal floor, ahead of the lower Bollinger Band clustering around $3,942, where a break would open the door to a deeper corrective phase.

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

• The Canadian Dollar gains as Iran recloses Strait of Hormuz.
• The US Dollar remains volatile as traders monitor developments in the Middle East.
• Traders await US CPI data and the Bank of Canada’s policy decision this week.

The Canadian Dollar (CAD) outperforms most of its major peers on Monday as renewed tensions in the Middle East push Oil prices higher amid fresh risks of supply disruption in the Strait of Hormuz.

At the time of writing, USD/CAD trades around 1.4144, remaining on the back foot for a fifth consecutive day. WTI trades around $74.50, up over 4% on the day. Higher crude Oil prices support the commodity-linked Loonie, given Canada’s status as a major Oil exporter.

The United States (US) and Iran exchanged missile and drone attacks over the weekend, while Tehran claimed that it had once again closed the Strait of Hormuz to tanker traffic.

However, US President Donald Trump said in a Truth Social post that the strait “is OPEN, and will remain OPEN, with or without Iran.” Trump added that the US would act as the “guardian” of the Strait and be reimbursed at a rate of 20% on all cargo shipped through the waterway.

The US Dollar (USD) remains volatile as traders assess the evolving situation in the Middle East. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.14 after briefly slipping below 101.00 earlier in the day.

Higher Oil prices are also reviving inflation concerns, adding pressure on central banks to tighten monetary policy. The Bank of Canada (BoC) will announce its policy decision on Wednesday and is widely expected to leave its interest rate unchanged at 2.25%.

BNY’s Geoff Yu noted, “Markets are expecting no change at least until Q4, but easing could be on the agenda with any renewed downside surprises to inflation.” Yu added, “The recent pick-up in core inflation and labor market improvements suggest the status quo is adequate, but as Governor Tiff Macklem noted, the BoC is prepared to ‘take action’ if the situation changes on inflation expectations.”

The US Consumer Price Index (CPI) data on Tuesday will be closely watched for fresh clues about the Federal Reserve’s (Fed) next move, alongside Fed Chair Kevin Warsh’s congressional testimony.

The Fed is widely expected to leave interest rates unchanged this month, while the CME FedWatch Tool shows a 71% probability of a rate hike in September.