Forex News
- Gold edges lower as the initial market reaction to Tuesday’s soft US consumer inflation fades.
- Elevated oil prices keep the door open for at least one Fed rate hike and weigh on the bullion.
- Escalating US-Iran tensions could support the safe-haven USD and favor the XAU/USD bears.
Gold (XAU/USD) maintains its offered tone through the first half of the European session on Wednesday and remains vulnerable after the previous day's failed attempt to find acceptance above the $4,100 mark. Despite soft US Consumer Price Index (CPI) data, investors remain worried about energy-driven inflation as escalating US-Iran tensions and the closure of the Strait of Hormuz contribute to elevated crude oil prices. Furthermore, US Federal Reserve (Fed) Chair Kevin Warsh’s commitment to price stability in his first congressional testimony leaves the door open for at least one rate hike by year's end and undermines the non-yielding bullion. However, a weaker US Dollar (USD) helps the commodity to hold above the $4,000 psychological mark and a nearly two-week low, touched on Tuesday.
The US Bureau of Labor Statistics reported that the headline Consumer Price Index (CPI) declined 0.4% in June, representing the largest one-month decrease since April 2020 and missing expectations of a 0.1% fall. Furthermore, the core gauge, which strips out volatile food and energy prices, was flat in June, compared to 0.3% consensus estimate. On a yearly basis, the headline and the core CPI decelerated to 3.5% and 2.6%, respectively, also missing forecasts. The data prompted traders to trim expectations of Fed rate hikes and dragged the USD to a nearly four-week low. The initial market reaction, however, faded quickly after Fed Chair Kevin Warsh told Congress that the central bank had no tolerance for persistently high inflation, while also touting the strength of the US economy.
Moreover, the recent rise in crude oil prices to a nearly one-month high poses a direct inflation risk, backing the case for further tightening by the Fed. According to the CME Group's FedWatch Tool, traders are pricing in the possibility that the US central bank will raise borrowing costs, either in September or December. Apart from this, persistent geopolitical risks stemming from the ongoing conflict in the Middle East hold back traders from placing aggressive bearish bets on the safe-haven buck. The US military launched another round of airstrikes against Iran, while Iran retaliated with attacks on US military assets in Gulf countries. Moreover, US President Donald Trump warned that the US would strike Iranian bridges and power plants unless Tehran returns to the negotiating table.
The aforementioned fundamental backdrop favors the USD bulls, suggesting that the path of least resistance for the Gold price remains to the downside. Traders now look forward to the release of the US Producer Price Index (PPI), which, along with Fed Chair Kevin Warsh's second day of congressional testimony, should influence the USD. Apart from this, the market focus will be on further developments surrounding the Middle East crisis, which might continue to infuse volatility in financial markets and contribute to producing short-term trading opportunities around the precious metal.
XAU/USD daily chart
Gold bears might target $4,000 ahead of weekly low
The XAU/USD pair holds within a downward parallel channel and well beneath the 200-day Simple Moving Average (SMA), which keeps the broader tone capped despite the recent bounce. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator has turned positive and is edging higher, hinting at improving but still constrained upside momentum as the Relative Strength Index (RSI) lingers around a neutral 40.80 level.
Hence, the top boundary of the channel near $4,140.69 might continue to act as the first meaningful barrier within the current structure. A sustained strength beyond the said hurdle is needed to ease the prevailing bearish bias. On the downside, the lower end of the descending channel around $3,718.03 offers the next key support, where a stronger reaction would be needed to suggest that sellers are losing control of the near-term trend.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Fed Chair Warsh testifies
Kevin Warsh took office as chairman of the Board of Governors of the Federal Reserve in May 2026, for a four-year term ending in 2030. His term as a member of the Board of Governors will expire in May 2040. Warsh, born in Albany (New York) on April 13, 1970, is an American financier and attorney who already served as a member of the Fed Board of Governors from 2006 to 2011 and was significantly involved in the central bank's response to the financial crisis. Before that, he served as a special assistant to the president for economic policy and the executive secretary of the National Economic Council under President George W. Bush.
Read more.Next release: Wed Jul 15, 2026 14:00
Frequency: Irregular
Consensus: -
Previous: -
Source: Federal Reserve
ING’s Francesco Pesole expects the Bank of Canada to keep rates at 2.25%, with limited incentive to push back against modest December tightening pricing. He sees June CPI potentially falling below 3.0% as petrol prices drop, while core remains near 2.0%. CAD front-end rates should be driven by Gulf developments, with supported Oil prices giving CAD short-term momentum, though a sustained USD/CAD break below 1.40 needs further dovish Fed signals.
BoC stance and CAD drivers
"The Bank of Canada will likely keep rates unchanged at 2.25% today, in line with consensus and pricing. However, this meeting could be a litmus test for revamped hawkish bets. There is probably little incentive to openly push back against pricing for December (20bp of tightening), but the BoC has equally very few bases to argue for any earlier action."
"Canada’s June CPI may follow the US measure lower on falling petrol prices, potentially falling back below 3.0%. Most importantly, core measures remain very close to 2.0%."
"The 2Q BoC business outlook survey showed an increase in inflation expectations, but responses were collected in May, before the reopening of the Strait of Hormuz. The latest re-escalation and improved jobs market picture should keep the BoC open to interest rate hikes, but expect the usual mention of USMCA-related concerns to add a dovish ingredient to the overall message."
"We expect few changes in the policy tone by the BoC at this meeting, leaving CAD front-end rates primarily driven by developments in the Gulf. CAD should enjoy more short-term momentum if oil prices stay supported and the BoC doesn’t surprise on the dovish side."
"Still, a sustainable break below 1.40 in USD/CAD requires further dovish Fed inputs, while USMCA headlines may keep offering support to the pair."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
People’s Bank of China (PBoC) Deputy Governor said during the European trading session on Wednesday that the central bank remains committed to loose monetary policy conditions to support overall demand.
Additional remarks
Will step up counter cyclical adjustments, help to expand domestic demand conditions.
7-day reverse repo rate remains the main policy rate, which provides pricing anchor for markets.
Overnight reverse repo operations will help improve liquidity management.
Studying plans to gradually increase frequency of overnight reverse repo operations.
To steadily push forward with reforms to improve policy framework.
To keep Chinese yuan currency basically stable.
Yuan currency faces both upward and downward factors, to continue to see two-way fluctuations amid global uncertainties.
Market reaction
The Australian Dollar (AUD) attracts slight bids following comments from PBoC's Deputy Governor. At press time, AUD/USD trades 0.17% higher to near 0.6986.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
United Overseas Bank’s Quek Ser Leang and Lee Sue Ann note AUD/USD surged to 0.6992 after an earlier dip, with strong short-term momentum pointing to further gains. They see scope for a test of 0.6995, while the major resistance at 0.7015 is key. Over 1-3 weeks, upward momentum is rebuilding, though it is unclear if the pair can break 0.7015; medium-term bias remains negative below 0.6835.
Australian Dollar tests key resistance
"24-HOUR VIEW: On Monday, AUD traded within a range of 0.6914/0.6970, closing on a soft note at 0.6917 (-0.48%). When it was at 0.6920 in the early Asian session yesterday, we indicated that “the slight increase in downward momentum suggests AUD could edge lower.” The subsequent price movements did not unfold as expected. AUD dipped to a low of 0.6913 and then recovered. During the NY session, AUD lifted off and soared to a high of 0.6992. While the sharp rise appears excessive, there is room for AUD to test 0.6995. The major resistance at 0.7015 is unlikely to come under threat. To keep the momentum going, AUD must hold above 0.6945, with minor support at 0.6960."
"1-3 WEEKS VIEW: In our most recent narrative from last Friday (10 Jul, spot at 0.6935), we highlighted that “the recent build-up in upward momentum has faded,” and AUD “is likely to trade in a range between 0.6890 and 0.6975.” Yesterday, AUD soared and broke above 0.6975 with a high of 0.6992. Upward momentum is starting to build again, but it is too early to determine whether AUD can break above the significant resistance at 0.7015. On the downside, a breach of the ‘strong support’ level, now at 0.6930, would indicate that the build-up in momentum has faded."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- GBP/JPY attracts buyers for the second consecutive day amid a combination of supporting factors.
- The UK-Japan rate gap and economic risks stemming from the Mideast conflict weigh on the JPY.
- Easing UK political uncertainty and the hawkish BoE benefit the GBP, further supporting the cross.
The GBP/JPY cross scales higher for the second straight day and climbs to a fresh weekly top, around the 217.70 region, during the first half of the European session on Wednesday. Moreover, spot prices remain within striking distance of the highest level since January 2008 and seem poised to appreciate further amid a supportive fundamental backdrop.
Despite looming intervention risks, the Japanese Yen (JPY) continues with its relative underperformance on the back of the wide gap in borrowing costs between Japan and other major economies, including the UK. The Bank of Japan (BoJ) raised the short-term policy rate in June to 1% or, the highest level since 1995, while the Bank of England's (BoE) base rate sits at 3.75%. This leaves an approximate gap of 275 basis points (bps), which keeps the so-called JPY carry trade active and continues to act as a tailwind for the GBP/JPY cross.
Meanwhile, Japan's economy is highly vulnerable to energy supply disruptions in the Strait of Hormuz as it relies on the Middle East for over 90% of crude oil imports. The closure of the critical waterway, along with a further escalation of tensions between the US and Iran, turns out to be another factor undermining the JPY. The British Pound (GBP), on the other hand, benefits from fading UK political uncertainty, hawkish BoE signals, and modest US Dollar (USD) weakness. This validates the positive outlook for the GBP/JPY cross and favors bulls.
Speaking before the Treasury Select Committee, BoE Governor Andrew Bailey warned on Tuesday of the potential effects of the resumption of the US-Iran conflict and that the event has demonstrated that inflation has not eased enough. Traders were quick to fully price in at least one 25 bps rate increase by year-end, and a possible first hike as early as September. This, in turn, suggests that the path of least resistance for the GBP/JPY cross is to the upside, and any corrective pullback is more likely to be seen as an opportunity for bullish traders.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- Dow Jones futures fall as investors weigh escalating Middle East tensions against cooling domestic inflation data.
- Markets are tracking US CENTCOM strikes on Iranian coastal sites near the Strait of Hormuz, a key energy shipping lane.
- Wall Street edged higher overnight, driven by tech, communication, energy, and bank stocks rising on strong quarterly earnings.
Dow Jones futures inch lower by 0.04% to trade around 52,770 during European trading hours on Wednesday. Meanwhile, S&P 500 futures and Nasdaq 100 futures advance 0.19% and 0.79%, trading near 7,600 and 30,030, respectively.
US stock futures remain mixed as investors weigh escalating geopolitical tensions in the Middle East against cooling domestic inflation data. Markets are closely tracking US Central Command (CENTCOM) military operations, which launched strikes targeting dozens of Iranian military sites along the coast and the strategic Strait of Hormuz, a vital shipping lane for nearly 20% of global energy flows.
Expectations for further Federal Reserve rate hikes have faded following a softer-than-expected Consumer Price Index (CPI) report. Headline inflation pulled back sharply to 3.5% year-over-year in June, down from May’s three-year high of 4.2% and well under the 3.8% market consensus. On a monthly basis, consumer prices contracted by 0.4%, reversing May’s 0.5% increase.
Wall Street edged higher in overnight trading on Tuesday. The Nasdaq Composite led the gains, rising 0.9%, while the S&P 500 climbed 0.38% and the Dow Jones Industrial Average added a modest 0.02%. Market gains were driven by the technology, communication services, and energy sectors, alongside banking stocks, which advanced on the back of another round of strong quarterly earnings. Investors are now turning their attention to Wednesday's upcoming wave of corporate results.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
ABN AMRO’s Rogier Quaedvlieg reviews the latest United States (US) Consumer Price Index (CPI) downside surprise and its implications for the Federal Reserve (Fed). He highlights that both headline and core inflation fell sharply versus consensus, prompting markets to reprice the odds of future hikes. Drawing on the June Federal Open Market Committee (FOMC) minutes, he outlines two main policy scenarios and concludes the Fed is likely to stay on hold for the rest of 2026.
Two-path framework for Fed policy
"The recently released FOMC minutes for the June meeting provided a useful guide to the FOMC’s reasoning."
"It contained a key paragraph outlining the fact that the FOMC essentially sees two plausible scenarios."
"The first is one where inflation improves ‘soon’, where they deem it appropriate that rates will be held steady in the near term before eventually being cut."
"The second scenario is one of sticky inflation (due to e.g. AI-related demand, the energy shock or tariffs) and a stable labour market, which would require ‘some firming’."
"The source of inflation does not seem to matter, and we see the most likely interpretation of ‘some firming’ as a 25 bps hike in both September and December."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Here is what you need to know on Wednesday, July 15:
The US Dollar (USD) remains under bearish pressure in the European session on Wednesday after weakening against its major rivals on Tuesday. In the second half of the day, the US Bureau of Labor Statistics will publish the Producer Price Index (PPI) data for June and the Bank of Canada (BoC) will announce monetary policy decisions.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.17% | -0.14% | 0.32% | -0.71% | -0.49% | -0.90% | 0.23% | |
| EUR | 0.17% | 0.03% | 0.52% | -0.55% | -0.37% | -0.73% | 0.41% | |
| GBP | 0.14% | -0.03% | 0.41% | -0.56% | -0.40% | -0.77% | 0.43% | |
| JPY | -0.32% | -0.52% | -0.41% | -1.10% | -0.81% | -1.25% | -0.12% | |
| CAD | 0.71% | 0.55% | 0.56% | 1.10% | 0.30% | -0.16% | 1.00% | |
| AUD | 0.49% | 0.37% | 0.40% | 0.81% | -0.30% | -0.36% | 0.69% | |
| NZD | 0.90% | 0.73% | 0.77% | 1.25% | 0.16% | 0.36% | 1.20% | |
| CHF | -0.23% | -0.41% | -0.43% | 0.12% | -1.00% | -0.69% | -1.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
On Tuesday, the BLS reported that annual inflation in the US, as measured by the change in the Consumer Price Index, softened to 3.5% in June from 4.2% in May. On a monthly basis, the CPI declined by 0.4%, while the core CPI was unchanged. All these prints came in below analysts' estimate and triggered a USD selloff. Although Federal Reserve (Fed) Chairman Kevin Warsh refrained from commenting directly on the soft inflation report during his congressional testimony, the USD Index lost more than 0.3% on the day. In the early European session, the index stays in negative territory below 101.00.
Warsh underscores Fed resolve on inflation
Fed Chair Warsh’s testimony scored 7/10 on the FXS Speechtracker, in line with the 7/10 historical average, signaling a steady, firmly anti-inflation stance rather than a tonal shift. The key remark that “if we get policy right – and we will – the inflation surge of the last five years will be a thing of the past” reinforces confidence in the Fed’s ability to subdue price pressures, backed by explicit “no tolerance” language on persistent inflation. With solid economic activity, accelerating AI-related business investment, and a stable labor market offsetting a lagging housing sector, his overall tone was moderately hawkish.
The FXS Fed Sentiment Index was unchanged at 127.19, keeping the Fed firmly in hawkish territory relative to the neutral 100 benchmark.
In his second day of testimony, Warsh will appear before the Senate Committee on Banking, Housing and Urban Affairs.
In the meantime, there are no signs of a de-escalation in the Middle East. The US has imposed its naval blockade of Iranian ports and the US military launched attacks for a fourth consecutive night. In response, Iran’s Islamic Revolutionary Guard Corps said it attacked US military assets in Bahrain, Kuwait and Jordan. After rising to its highest level in a month above $80 per barrel on Tuesday, West Texas Intermediate (WTI) crude Oil trades sideways at around $79 on Wednesday.
The data from China showed earlier in the day that the Gross Domestic Product (GDP) expanded at an annual rate of 4.3% in the second quarter. This print followed the 5% growth recorded in the first quarter and came in below the market expectation of 4.5%. AUD/USD struggles to build on Tuesday's strong gains and trades in a narrow channel below 0.6700 in the European morning on Wednesday.
EUR/USD stays in a consolidation phase above 1.1400 after rising about 0.4% on Tuesday. Eurostat will publish Industrial Production data for May later in the session.
The BoC is forecast to keep the policy rate unchanged at 2.2% following the July meeting. After falling about 0.7% on Tuesday, USD/CAD stabilizes at around 1.4050 in the European morning on Wednesday.
USD/JPY registered marginal losses on Tuesday despite the broad-based USD weakness. The pair fluctuates in a tight band above 162.00 early Wednesday.
GBP/USD holds steady at around 1.3400 after closing in positive territory on Tuesday.
Gold (XAU/USD) staged a rebound and erased a portion of its weekly losses on Tuesday. With tensions in the Middle East remaining high midweek, the precious metal stays on the backfoot and declines toward $4,000.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
MUFG’s Derek Halpenny notes that weaker US CPI has sharply reduced market expectations for a Federal Reserve rate hike, undermining a key source of recent US Dollar strength. He highlights Fed Chair Warsh’s firm focus on the 2% inflation mandate, the impact of Middle East tensions and higher Oil prices, and observes that EUR/USD is finding support around the 1.1400 level.
Weaker CPI undermines hike expectations
"Following Fed Governor Waller’s comment on Monday that a strong core CPI print would compel the Fed to hike in the near-term, the CPI report released yesterday had become even more important for the financial markets. The fact that the CPI print was much weaker than expected has removed in an instant a key near-term driver of US dollar strength. We never agreed with the pricing of a possible July rate hike (or indeed through the rest of the year) and the CPI print has helped remove that nearly fully from close to a 50% probability to closer to 15% now."
"Just like following his first FOMC meeting, Warsh spoke with conviction in relation to the Fed achieving its 2% inflation goal. The CPI print was not “mission accomplished” and he wasn’t going to “cherry pick” data. He added that he was “doubling down” on the Fed’s inflation goal."
"Despite the muted FX reaction, the scale of weakness in the CPI report certainly helps weaken on key pillar of support for the dollar – the prospect of a near-term hike. That can open up scope for further dollar depreciation. However, it is difficult to trade with conviction given the re-escalation in the conflict in the Middle East and the 13% surge in crude oil prices this week."
"But EUR/USD continues to struggle to sustain declines below the 1.1400 level and at the very least the CPI data reinforces the support around that level."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- WTI prices reached a one-month highs following a new US naval blockade and retaliatory Iranian drone strikes.
- 20% of global energy flows face disruption as renewed conflict near the Strait of Hormuz threatens key shipping routes.
- Softer-than-expected US inflation data fueled broader market optimism for lower interest rates.
West Texas Intermediate (WTI) oil price continues to gain ground for the third successive day, trading around $79.40 per barrel during the European session on Wednesday. Crude oil prices pushed higher as supply anxieties mounted following a fresh round of US Central Command (CENTCOM) military strikes against Iran. The operation targeted dozens of military sites along the Iranian coast and the Strait of Hormuz, a vital maritime bottleneck responsible for nearly 20% of global energy flows. The coordinated strike saw US fighter jets, drones, and naval vessels deploy precision munitions against Iranian missile and drone facilities.
Earlier, US President Donald Trump threatened further military action, coming on the heels of a reinstated US blockade against Tehran in the critical Strait of Hormuz. These escalating tensions between Washington and Tehran have directly underpinned the oil market by stoking global supply fears. This friction introduces new uncertainty to energy markets, particularly as Persian Gulf producers had only recently begun ramping up exports following an interim peace accord.
Meanwhile, softer-than-expected US inflation figures provided broader market support by fueling hopes for a less hawkish Federal Reserve stance. US Consumer Price Index (CPI) inflation cooled to 3.5% year-over-year in June, retreating sharply from May's three-year high of 4.2% and landing well below the 3.8% market consensus. On a monthly basis, headline CPI contracted by 0.4% in June, marking a significant reversal from the 0.5% increase seen in May.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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