US Dollar Steady Amid Tensions
The US Dollar (USD) saw continued demand on Tuesday, largely driven by rising tensions between Israel and Iran. There are growing concerns that the US might get drawn into Israel’s actions against Iran, overshadowing economic indicators and Federal Reserve policy discussions.
What to Expect on Wednesday, June 18th:
Geopolitics are dominating the narrative. Reports suggest that President Donald Trump has opted not to engage with Iran to secure a deal, as per a US official speaking to CNN. Additionally, Axios reported that Trump might be contemplating military action against Iran, which could bolster the dollar and other safe-haven assets like gold.
The USD climbed 0.74% to a four-day high, exceeding 98.86, even as US Treasury yields fell sharply. This gain occurred alongside weaker industrial production figures and the anticipation of US retail sales data for May. Tomorrow’s releases will include initial claims for unemployment and housing starts, as well as the Federal Open Market Committee (FOMC) policy decisions, which will influence the dollar’s direction.
Consequently, most G8 currencies lagged behind the US dollar. Despite positive data from Germany’s Zew survey, the EUR/USD traded below 1.1500, as European Central Bank (ECB) officials appeared to be taking cues from the Fed and maintaining a cautious stance reliant on incoming data. Traders are closely watching the Eurozone’s current account balance and the HICP figures from ECB staff.
The GBP/USD faced pressure due to caution in the market, even as expectations held that the Bank of England (BOE) would keep interest rates unchanged at its upcoming meeting on Thursday. BOE officials are set to provide an update on the UK’s inflation figures on June 18th.
Bank of Japan (BOJ) Governor Ueda mentioned that the BOJ’s rate remained at 0.50%, with the currency surpassing 145.00. Upcoming releases include Ueda’s press conference outcomes, the Reuters Tankan index, and data on machinery orders and trade.
The Antipodean currencies reversed their trends on Tuesday, with souring sentiment ahead of the FOMC meeting. The AUD/USD dropped by 0.75% to settle at 0.6470, while the NZD/USD slid 0.77% to 0.6010. New Zealand will report on its current accounts soon, but there’s no schedule for Australia.
In commodities, WTI crude oil surged over 4.82%, rebounding from a daily low of $69.56 to reach $73.33 per barrel as concerns about the Middle East escalated, suggesting possible US involvement in more conflicts.
Gold prices remained steady, closing around $3,387 after peaking at $3,403, having bounced from a low of $3,366. Even though central bank surveys indicate rising gold reserves, traders show hesitance to push prices higher. This sentiment plays a significant role in shaping the direction of precious metals in relation to FOMC monetary policy decisions.
