Forex News

• US Dollar Index climbs to a four-day high as renewed US-Iran tensions support safe-haven demand.
• Rising Oil prices lift September Federal Reserve rate hike expectations.
• Traders turn their attention to the June FOMC Minutes.

The US Dollar Index (DXY) consolidates modest gains on Wednesday as traders assess renewed tensions between the United States and Iran and the potential economic fallout. At the time of writing, the index, which tracks the Greenback's value against a basket of six major currencies, is trading around 101.20, hitting a four-day high.

The US Dollar (USD) strengthened after US President Donald Trump declared that the ceasefire deal with Iran was "over." However, Reuters later reported, citing a source familiar with the talks, that Trump did not repeat those remarks during the closed NATO leaders' meeting.

Tensions escalated after renewed fighting between the United States and Iran overnight, following attacks on commercial vessels near the Strait of Hormuz. Trump warned that the US would “probably hit them again tonight” and added that “we may take over Kharg Island.”

Meanwhile, Iran's Press TV, citing an informed source, reported that Tehran would close the Strait of Hormuz in the event of any fresh attacks.

The latest flare-up has pushed Oil prices higher, reviving inflation concerns. West Texas Intermediate (WTI) crude Oil is trading around $74.50 per barrel, up more than 8% so far this week.

According to the CME FedWatch Tool, markets are now pricing in a 68% probability of an interest rate hike at the September meeting, up from 58% a day earlier.

Attention now turns to the June Federal Open Market Committee (FOMC) meeting minutes, due later in the American session at 18:00 GMT, for fresh clues on the Federal Reserve's (Fed) interest rate path.

ING FX strategist Francesco Pesole wrote in a note, "Today’s minutes will clarify how serious members are about the possibility of rate hikes. Based on post-meeting communication, we see limited risk of a dovish surprise in the minutes."

Pesole added that he expects the minutes to "cement the hawkish message" and support the US Dollar, although he does not expect them to trigger a major repricing of interest rate expectations following last week's softer US jobs report.

On the US Dollar Index, Pesole said: "We expect mostly range-bound DXY in the very near term, with some upside risks to 101.50-102.0 unless large JPY interventions cause a mechanical correction."

Scotiabank strategists Shaun Osborne and Eric Theoret highlight renewed weakness in the Japanese Yen (JPY), which is underperforming G10 peers and threatening fresh multi-decade lows as USD/JPY trades at levels last seen in 1986. They stress that surging Oil prices are a clear downside risk via Japan’s terms of trade, while the chart offers little guidance on resistance after the recent powerful rally.

Multi-decade highs and downside risks

"The yen is soft, down 0.2% vs. the USD and underperforming most of the G10 currencies into Wednesday’s NA session."

"The renewed weakness is worrisome following last week’s failed recovery and the yen looks to be threatening a break to fresh multi-decade lows."

"The latest resurgence in geopolitical tensions presents a clear downside risk for the yen, as surging oil prices deliver a crushing blow to Japan’s terms of trade."

"The USD/JPY chart offers little clarity in terms of framing major resistance levels, given that the recent rally has delivered a push to fresh multi-decade highs reached levels last seen in 1986."

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

ING’s Francesco Pesole reports that the Reserve Bank of New Zealand (RBNZ) raised rates to 2.50%, delivering a more hawkish message than expected and signalling further tightening is likely. He notes consensus within the Committee, sees another hike around September or October, but stresses dovish risks later in 2026 and maintains a 0.59 NZD/USD target by year-end.

Further tightening signalled by rbnz

"The Reserve Bank of New Zealand hiked rates by 25bp to 2.50% today, in line with our call. The accompanying message had a more hawkish tone overall than we had anticipated, though. The statement reads that further hikes “appear likely at upcoming meetings”, even if their timing is “highly uncertain”."

"There is still plenty of uncertainty around the inflation outlook, but the Bank stressed how non-tradable inflation had been persistent even before the war."

"We had suspected a close vote split (4-2) could send dovish vibes, but the minutes said the Committee “reached consensus” to increase rates. This can definitely mean one or two members (we suspect Conway and Silk) preferred a hold, but not casting a dissenting vote means – in our view – there is interest in preserving the market’s hawkish pricing."

"OIS-embedded expectations are for 38bp of tightening by year-end. This meeting has reinforced our previously narrow call for another hike in September/October. Still, risks remain on the dovish side, as a delay in tightening looks more likely than two more interest rate increases, as the next round of projections should show inflation falling back to target by mid-2027."

"NZD’s post-hike rally looks more sustainable in the near term than we had anticipated. The dovish risks highlighted above may only emerge later in the year, when we expect AUD to outpace NZD again. We still target 0.59 in NZD/USD by year-end."

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

• AUD/USD trades near 0.6920 amid geopolitical uncertainty and caution ahead of the FOMC Minutes.
• Trump’s comments on Iran and Spain weigh on growth-sensitive currencies like the Australian Dollar.
• China’s upcoming PMI data will be key for the Aussie, while hawkish FOMC Minutes could further limit AUD/USD recovery.

AUD/USD trades under pressure near 0.6920 on Wednesday, following the US Dollar (USD) holding firm amid geopolitical risk and caution ahead of the Federal Open Market Committee (FOMC) Minutes.

The Australian Dollar (AUD) struggled to gain traction as investors moved toward the Greenback after United States (US) President Donald Trump said the interim memorandum of understanding with Iran was “over,” adding that he did not want to engage with Tehran.

Trump also added to broader uncertainty after saying he had ordered Treasury Secretary Scott Bessent to cut off all trade with Spain, calling Madrid a “terrible partner” in NATO. Although the direct impact on AUD/USD is limited, the comments reinforced a risk-off tone across markets, weighing on growth-sensitive currencies such as the Aussie.

On the China side, investors will keep a close eye on the upcoming Consumer Price Index (CPI) data, as Australia’s outlook remains closely tied to Chinese demand and broader economic momentum. Softer inflation could reinforce concerns over weak domestic demand in China, potentially weighing on the Aussie.

Attention now turns to the Federal Open Market Committee (FOMC) Minutes from the June 16-17 meeting, the first under Fed Chair Kevin Warsh. A hawkish tone could keep the USD supported and limit AUD/USD recovery attempts.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6920, retaining a mildly bearish, capped tone as it remains below both the 20-period Simple Moving Average (SMA) at 0.6937 and the 100-period SMA at 0.6948. A dense band of nearby horizontal barriers at 0.6925, 0.6932 and 0.6941 reinforces the overhead supply, while the Relative Strength Index (RSI) around 46 hints at fading bullish momentum rather than outright oversold conditions.

On the topside, initial resistance is located at 0.6925, ahead of 0.6932. A sustained break above these levels would expose the 20-period SMA at 0.6937, followed by the 0.6941 hurdle and the 100-period SMA at 0.6948. On the downside, immediate support is seen at 0.6907, where a failure would likely extend the corrective slide toward lower levels on the four-hour horizon.

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

(This story was corrected on July 8 at 10:35 GMT to inform about the Chinese CPI data instead of the PMIs, as previously stated).

Rabobank's Senior FX Strategist Jane Foley discusses UK political dynamics, noting Burnham’s likely unchallenged path to becoming Prime Minister on July 20 and his popularity within Labour. Foley stresses Labour’s weak polling position, tight public finances, tax constraints and uncertainty over the choice of Chancellor as key factors for market sentiment and potential gilt market anxiety.

Burnham’s agenda and fiscal constraints

"A messy Labour leadership election this summer, would probably not have served anyone well. Although there is a July 17 deadline for other Labour MPs to declare their candidacy for party leaders, it would appear that Burnham will be unchallenged allowing him to take the reins on July 20. The relatively smooth transition will come as a relief to market."

"Also, the popularity of Burnham within Labour may also be a good omen given the deep party factions which Starmer was unable to effectively control. This, however, does not detract from the fact that Labour is trailing in third place behind Reform and the Tories in YouGov’s weekly voting intentions poll."

"Nor does it step around the fact that the tightness of UK public finances suggests that the agenda for Burnham will be very tight. The UK tax burden has already reached a post war high, and Chancellor Reeves’ increases to companies’ national insurance contributions and minimum wages have been widely cited by businesses as a factor behind weaker UK employment."

"While little detail has been provided as to how Burnham intends to fund his programme, he has stated that he will stick to Labour’s 2024 election manifesto. This ruled out hiking taxes on workers, which limits Burnham’s options and will probably leave the gilt market anxious despite reassurances that he will keep Reeves’s fiscal rules."

"Who Burnham appoints to be Chancellor is widely considered to be a crucial indicator as to the direction of travel of his agenda. Consequently, it will also be a test for market sentiment."

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

Scotiabank strategists Shaun Osborne and Eric Theoret note the British Pound (GBP) is slightly softer but supported by a sharp repricing of Bank of England (BoE) tightening. Improving United Kingdom (UK)–United States (US) spreads and positive sentiment around the UK leadership transition underpin GBP, while technicians remain bullish, targeting an extension of gains toward 1.36 within a 1.3300–1.3400 near-term range.

BoE repricing underpins Pound outlook

"The pound is soft, down a fractional 0.1% vs. the USD and a mid-performer among the G10 currencies in mixed overall trade. The latest resurgence in geopolitical tensions has amplified the renewed tightening in BoE expectations that we had observed over the past week or so."

"The recovery in UK-US spreads is offering fundamental support to the GBP, and compounding the sentiment-related strength observed in response to the market’s favourable assessment of the current UK leadership transition."

"Neutral/bullish—the GBP’s recent recovery is notable, with clear gains from the mid-1.31s in late June. The recovery looks to have stalled around 1.34, with clear resistance offered by both the 50 and 200 day MA’s."

"We remain bullish however, and look to an extension of the GBP’s gains toward 1.36. We look to a near-term range bound between 1.3300 and 1.3400."

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

ING’s Francesco Pesole notes that recent equity jitters and firm Oil prices have underlined the Dollar’s safe-haven appeal, while markets look to the June Federal Open Market Committee (FOMC) minutes. He argues the Federal Reserve’s (Fed) hawkish shift and Dot Plot have kept the Dollar supported, and expects US Dollar Index (DXY) to trade largely rangebound with modest upside risks in the near term.

Fed minutes seen cementing hawkish stance

"Equity jitters offered the dollar some support yesterday – a reminder of the greenback’s very strong safe-haven appeal despite the concentration of AI-sensitive stocks in US indices. Oil prices are also trading on the strong side after some overnight military action in Iran and the Treasury revoking the waiver that allowed Teheran to sell crude. Markets will keep monitoring the situation but have tended to fade Middle East re-escalation risk, so there’s a good chance it will be mostly macro news driving FX today, as the June FOMC minutes are released."

"The importance of the Fed's hawkish shift in June for the dollar cannot be overstated. Markets’ conviction around tightening is what prevented the dollar from following oil prices lower, and that conviction relies heavily on the median Dot Plot signalling a hike and Kevin Warsh reaffirming a strong commitment to the inflation mandate."

"Today’s minutes will clarify how serious members are about the possibility of rate hikes. Based on post-meeting communication, we see limited risk of a dovish surprise in the minutes. We expect a cementing of the hawkish message to firm up dollar momentum, although we don’t expect it to lead to a break higher as markets may be reluctant to reprice rate expectations aggressively higher (now 35bp by December) after the soft jobs report."

"We expect mostly rangebound DXY in the very near term, with some upside risks to 101.50-102.0 unless large JPY interventions cause a mechanical correction."

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

Societe Generale strategist Kunal Kundu expects India’s June 2026 headline Consumer Price Index (CPI) inflation to print around 4.1% year-on-year, slightly above May’s 3.9% but still within the RBI’s tolerance band. Kundu highlights food, fuel and services as key drivers, while noting partial and delayed pass-through from wholesale prices. It argues that competitive conditions, policy buffers and moderate demand should prevent a sustained inflation acceleration.

Food, fuel and core inflation dynamics

"India's June 2026 headline CPI inflation is likely to print at around 4.1% yoy, marking a modest acceleration from 3.9% in May while remaining comfortably within the RBI’s inflation tolerance band. The expected increase is less a reflection of broad-based inflationary pressures and more a consequence of a gradual firming in food, fuel and select services categories over recent months."

"At the same time, despite a growing divergence between wholesale and consumer prices following the sharp increase in global commodity and energy costs, the transmission from producer prices to retail inflation is likely to remain partial and delayed."

"Consequently, while core CPI may move incrementally higher, it remains consistent with an inflation environment centred around the RBI's target rather than one characterised by persistent overheating. A key question for markets is why consumer inflation remains near 4% even as wholesale price pressures have increased materially. The answer lies in the nature of the current shock and the structure of domestic demand."

"Together, these factors suggest that the widening gap between WPI and CPI is better interpreted as evidence of margin pressure within the production chain rather than an imminent surge in retail inflation.

"In sum, a June 2026 CPI print of approximately 4.1% yoy would be consistent with a backdrop of gradually firming food and energy prices, modestly higher services inflation and a slow normalisation of core inflation.

"As a result, inflation is likely to move modestly above recent lows rather than enter a sustained acceleration phase, supporting the case for continued policy patience from the RBI."

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

• Silver extends its decline for a third consecutive day after Donald Trump's latest remarks on Iran.
• Rising geopolitical tensions push Oil prices higher, fueling inflation concerns and supporting the US Dollar.
• Investors now await the Federal Reserve Minutes for fresh clues on the interest rate outlook.

Silver (XAG/USD) extends its decline on Wednesday and trades around $58.45 at the time of writing. The white metal remains under pressure after comments from US President Donald Trump revived concerns about renewed conflict in the Middle East, supporting the US Dollar (USD) and US Treasury yields.

Donald Trump said that the memorandum of understanding aimed at ending the conflict with Iran is now "over," adding that he no longer wants to negotiate with Tehran. He also stated on Wednesday that the United States (US) could launch new strikes against Iran as early as tonight, saying a deal is not necessary and raising the possibility of targeting strategic infrastructure, including the country's electricity grid, water treatment facilities and Kharg Island, Iran's main Oil export terminal.

This renewed escalation has increased concerns about disruptions to global Oil supplies, with the Strait of Hormuz remaining at the center of market attention. Higher energy prices are reviving inflation expectations, which could increase the Federal Reserve's (Fed) room to tighten monetary policy and therefore weigh on non-yielding assets such as Silver.

Investors are now turning their attention to the release of the Fed June meeting Minutes, which could provide fresh guidance on the monetary policy outlook. Markets will assess whether policymakers remain willing to cut interest rates despite the risk that higher energy prices could sustain inflationary pressures.