Wednesday was volatile as fears of a US attack on Iran intensified, even though there were signs Tehran might be open to resuming nuclear talks, though it's unclear which side initiated the approach. US economic data remained largely unchanged, but the Fed showed resistance to further rate cuts, supported by higher inflation forecasts, slightly weaker growth projections, and stable employment expectations. The Fed’s dot plot still signals two rate cuts in 2025, and Chair Jerome Powell reiterated that future decisions will depend on incoming data.
By early Thursday, markets calmed due to the Juneteenth holiday in the US, allowing traders to take a breather. Attention shifted to upcoming monetary policy decisions from Switzerland and the UK, alongside speeches from ECB officials. Australia’s employment data aligned with the RBA’s cautious tone, while New Zealand’s strong GDP growth—following a technical recession in late 2024—boosted optimism for the region. Meanwhile, speculation about the Bank of Japan keeping rates on hold until early 2026, along with increased government bond sales, contrasted with a Reuters survey showing most Japanese firms are unaffected by US tariffs and support a sales tax cut.
In this environment, the US Dollar Index (DXY) has printed a five-day winning streak, while gold has remained under pressure. EURUSD and GBPUSD stayed near their lowest levels in a week and a month, respectively. USDJPY slowed down after ending a three-day winning streak, AUDUSD reversed Wednesday’s gains, and NZDUSD dropped to a more than two-week low. Crude oil bounced back from previous losses, while Bitcoin (BTCUSD) and Ethereum (ETHUSD) remained lackluster. Equities traded mixed, and bond yields fell as investors leaned toward safe-haven assets.
The US Dollar remains strong amid a broad shift toward safe-haven assets, unsettling global markets. However, USDJPY stays under pressure after its first daily loss in four sessions, supported by the Japanese Yen’s safe-haven appeal. That said, a lack of progress on a US-Japan trade deal, mixed Japanese data, and uncertainty over the Bank of Japan’s bond sales and rate outlook limit further JPY gains.
At the same time, EURUSD hovers near its weekly low, weighed down by geopolitical tensions, stalled EU-US trade talks, and cautious comments from ECB officials. Political uncertainty within the Eurozone and inflation data that matched earlier forecasts add to the Euro’s weakness.
GBPUSD extends its three-day losing streak to hit a one-month low, reflecting US Dollar strength, doubts over the UK’s deal-making ability, mixed signals from BoE officials, and a technical pullback. Despite recent low volatility, the pair is on track for its biggest weekly drop since early January, ahead of the BoE’s policy decision, where rates are expected to remain unchanged.
Risk-off sentiment, a stronger US Dollar, and a lack of upbeat news from Australia, New Zealand, and Canada weigh on AUDUSD and NZDUSD, while boosting USDCAD. Australia’s jobs data showed mixed results—employment fell after a strong previous reading, though other indicators held steady. New Zealand's GDP rebounded, ending a late-2024 technical recession. Meanwhile, USDCAD rises despite stronger oil prices and optimism over a US-Canada trade deal, as BoC Governor expressed hope the agreement would lead to tariff removal.
Crude oil pulled back from its weekly high and closed Thursday slightly lower amid hopes for a US-Iran nuclear deal that could ease Iran-Israel tensions. This drop came despite a sharp inventory draw confirmed by both the API and EIA. Still, WTI crude is on track for a third straight weekly gain, supported by ongoing geopolitical risks threatening supply and the limited impact of OPEC+ efforts or Trump’s “Drill baby drill” push to boost output.
Meanwhile, gold remains under pressure and is set for its first weekly loss in three weeks. A stronger US Dollar and an absence of physical demand news overshadow safe-haven flows from geopolitical uncertainty, even as China signals more stimulus.
Ongoing Middle East tensions, a stronger US Dollar, and a lack of positive crypto news weigh on Bitcoin (BTCUSD) and Ethereum (ETHUSD), despite steady ETF inflows. Expectations of an upcoming altcoin season in 2025 add further pressure. These top cryptos also appear to overlook Binance’s recent initiatives aimed at boosting BTC and ETH adoption through new consumer-focused platforms.
Looking ahead, traders will focus on monetary policy decisions from the Swiss National Bank (SNB) and the Bank of England (BoE), along with speeches from mid-tier European Central Bank (ECB) officials. However, the Juneteenth holiday in the US may limit overall market activity. The SNB is expected to cut rates by 0.25%, while the BoE is likely to hold rates steady. Even so, USDCHF and GBPUSD may see limited movement.
That said, the Swiss Franc’s safe-haven appeal could weigh on USDCHF if the US Dollar weakens due to the ongoing US-Iran trade deadlock and Middle East tensions, with no signs of progress on a ceasefire or trade deal. Gold and crude oil may consolidate their recent moves, while the Antipodean currencies could remain under pressure. Cryptocurrencies, equities, and bond yields also have little room for recovery unless a breakthrough in the Israel-Iran conflict emerges, which remains unlikely.
May the trading luck be with you!
