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Australian Dollar holds losses following RBA decision

  • AUD/USD remains subdued as the RBA held its Official Cash Rate steady at 4.35%, matching market expectations.
  • China’s Retail Sales fell 0.6% year-on-year in May, missing expectations of a flat reading.
  • Traders price in the odds of the Fed holding interest rates steady at 3.50% to 3.75% this Wednesday.

AUD/USD pares its recent gains from the previous day, trading around 0.7050 during the Asian hours. The pair remains subdued as the Australian Dollar (AUD) struggles to shake off losses following the Reserve Bank of Australia’s (RBA) latest monetary policy update.

As widely anticipated by the market, the RBA decided to keep its Official Cash Rate (OCR) unchanged at 4.35% during its Tuesday meeting. The decision offered few surprises and lacked the hawkish spark needed to lift the currency, leaving the Australian Dollar highly sensitive to outside economic pressures.

Compounding the pressure on the AUD is a wave of weak economic data out of China. Because Australia’s economy relies heavily on commodity exports to Beijing, negative developments in China routinely drag down the antipodean currency.

China’s domestic demand slumped sharply in May, with Retail Sales contracting by 0.6% year-on-year against expectations of a flat reading. Additionally, Fixed Asset Investment dropped at a faster pace of -4.1%, failing to meet the projected -2%. While Industrial Production offered a minor bright spot by coming in stronger-than-expected at 4.5%, the overall data packet highlighted an uneven recovery that is weighing heavily on Aussie trader sentiment.

Meanwhile, the US Dollar (USD) is holding steady as broad market caution keeps investors on the defensive. Geopolitical anxieties persist around Iran’s unresolved nuclear program, keeping risk appetite low. Even though US President Donald Trump announced that a memorandum of understanding has been signed to end the regional conflict and reopen the blockaded Strait of Hormuz, market participants remain deeply skeptical because neither Washington nor Tehran has released the official text of the agreement. This ongoing uncertainty has driven defensive flows into the safe-haven greenback.

Looking ahead, the Federal Reserve (Fed) is universally expected to keep its benchmark interest rate unchanged at a target range of 3.50% to 3.75% on Wednesday. Elevated energy prices stemming from the Middle East tensions have kept US inflation sticky, giving the central bank reason to hold steady. Market participants will be intensely focused on the upcoming press conference for crucial clues on how the new Fed Chair, Kevin Warsh, intends to guide the central bank and shape monetary policy in this new era.

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Australian Dollar retreats against New Zealand Dollar as RBA leaves rates steady at 4.35%

  • The Australian Dollar retreats to near 1.2150 against the New Zealand Dollar after the RBA’s monetary policy announcement.
  • The RBA has left its OCR steady at 4.35% after three back-to-back interest rate hikes.
  • The Australian central bank has stated that short-term measures of inflation expectations have eased.

The Australian Dollar (AUD) falls back to near 1.2150 from its intraday high of 1.2168 against the New Zealand Dollar (NZD) after the Reserve Bank of Australia’s (RBA) monetary policy announcement. The Australian central bank has announced a pause on its monetary-tightening cycle by leaving the Official Cash Rate (OCR) steady at 4.35%, as expected.

In all three policy announcements so far this year, the RBA raised interest rates by 25 basis points (bps).

The RBA was expected to leave interest rates unchanged as latest Australian inflation data showed that the Consumer Price Index (CPI) has started cooling down and employment conditions appear to be worsening.

In April, Australia’s CPI arrived lower at 4.2% Year-on-Year (YoY), missed 4.4% estimates and the prior reading of 4.6%. The Unemployment Rate jumped to 4.5% from expectations and the previous reading of 4.3%.

In the monetary policy statement, the RBA has stated that short-term measures of inflation expectations have eased, but remain higher than earlier in the year. On external shocks, the RBA said, “Global oil supply issues will take some time to resolve, maintaining upward pressure on global energy prices and inflation.”

In New Zealand (NZ), investors await the Q1 Gross Domestic Product (GDP) data, which will be released on Thursday. The NZ economy is expected to have expanded at a stronger pace of 0.9% against the previous reading of 0.2%.

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Swiss Franc declines as market caution lifts US Dollar

  • USD/CHF appreciates as the US Dollar remains stronger amid market caution ahead of further US-Iran peace talk updates.
  • Traders price in the odds of the Fed holding interest rates steady at 3.50% to 3.75% this Wednesday.
  • Money markets expect the Swiss National Bank to keep interest rates unchanged through the end of the year.

USD/CHF gains ground after registering modest losses in the previous day, trading around 0.7950 during the Asian hours on Tuesday. The pair appreciates as the US Dollar (USD) holds steady amid broad market caution. Investors remain on the defensive as they await further updates regarding Iran’s unresolved nuclear program.

Both Washington and Tehran have not released the official text of the agreement; major shipping lines are delaying vessel rerouting through the strategic waterway until full transparency is established.

Even though US President Donald Trump announced that a memorandum of understanding (MoU) has been signed to end the conflict and reopen the blockaded Strait of Hormuz, market participants remain deeply cautious. According to Iran’s semi-official Mehr news agency, the current draft calls for the strait to reopen within 30 days under Iranian arrangements.

The Federal Reserve (Fed) is widely expected to keep its benchmark interest rate unchanged at a target range of 3.50% to 3.75% on Wednesday, which could be attributed to the higher US inflation due to elevated energy prices linked to Middle East tensions. Traders will be closely monitoring the press conference for cues on how new Fed Chair Kevin Warsh intends to lead the central bank into its next era.

Sharp declines in oil prices have helped alleviate inflationary pressures, reducing expectations for further monetary tightening. Consequently, money markets are now pricing in no additional interest rate changes from the Swiss National Bank (SNB) for the remainder of the year.

This aligns with the latest data showing Swiss Producer and Import Prices fell 1.8% year-on-year in May. While this marks the softest pace of deflation in five months, easing from April’s 2.0% decline due to slower drops in import prices, the monthly figures caught markets off guard. On a month-over-month basis, the price index fell 0.4%, missing forecasts for a 0.4% increase and reversing April’s 0.8% gain.

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Offshore Yuan Retreats from Multi-Year High

The offshore yuan slipped to around 6.76 per dollar on Tuesday, retreating from a more than three-year high reached in the previous session as investors weighed a mixed set of economic data from China. New home prices across 70 cities marked the 35th consecutive month of contraction and remaining at their steepest pace since May 2025, while fixed-asset investment declined more than market expectations in the January–May period. Moreover, retail sales unexpectedly fell in May, marking the first annual decline since December 2022. Providing some support, industrial output exceeded market expectations in May, accelerating from April’s near three-year low. In addition, the surveyed urban unemployment rate eased to a five-month low in May. Adding to the currency’s pullback, Allianz Global Investors scaled back some of its bullish yuan positions and shifted to a neutral stance, locking in gains after a rally that propelled the yuan to become Asia’s best-performing major currency this year.

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Trade of The Day – EUR/GBP

Facts:

  • The price is near the lower boundary of a consolidation range between 0.886 and 0.861.
  • Upward corrections within the consolidation are breaking to increasingly lower levels, while at the same time testing resistance around 0.863.
  • The EMA100 has crossed the EMA200 from above.

Recommendation:

Short position (Sell) on EURGBP at the market price.

  • Target price (Take Profit; TP): 0.8400
  • Stop Loss (SL): 0.8817

EURGBP (D1)

Source: xStation5

OPINION :

The EURGBP rate is once again testing the lower boundary of the consolidation, which can also be treated as a developing 1:1 pattern, potentially ending with a downside breakout. The repeated defense of the ~0.86 level indicates the strength of this zone; however, increasingly weaker upward corrections within the consolidation reveal buyer weakness and point to the likely direction of further price movement.

Methodology and assumptions:

  • The recommendation is based on technical analysis of the chart, in particular EMA moving averages and Fibonacci levels.
  • The target level was determined based on Fibonacci levels.
  • The protective stop-loss order was set based on a favorable risk-to-reward ratio and with reference to a Fibonacci level.
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Swiss Franc edges higher on US–Iran peace deal

  • USD/CHF falls to around 0.7930 in Monday’s early European session. 
  • US and Iran confirmed a ‘peace deal’ was reached, signing in Switzerland on Friday. 
  • The Fed is widely anticipated to keep its interest rate steady as it remains in “wait-and-see” mode.

The USD/CHF pair slumps to near 0.7930, the lowest since June 5, during the early European trading hours on Monday. The US Dollar (USD) weakens against the Swiss Franc (CHF) after the US and Iran announced a framework deal for peace. Traders brace for the US Federal Reserve (Fed) interest rate decision later on Wednesday. 

US President Donald Trump on Sunday announced a “great deal” to end the war with Iran. Iran’s National Security Council stated that the US naval blockade will be lifted immediately and the war will end on all fronts, including Lebanon. Pakistan’s Prime Minister Shehbaz Sharif said that the official signing ceremony for the “peace deal” will take place on Friday in Switzerland. Signs of progress in the US-Iran peace agreement boost the CHF and create a headwind for the pair. 

The US central bank is set to keep its benchmark interest rate unchanged at a target range of 3.50% to 3.75% at its upcoming policy meeting on Wednesday. Traders will closely monitor the press conference and take more cues about how new Fed chair Kevin Warsh will lead the US central bank into its next era. Any hawkish remarks from Fed officials could lift the Greenback and act as a headwind for the major pair. 

Markets have priced in nearly a 64% chance of a Fed interest rate hike in December this year after the peace deal, down from 69% last week, according to the CME FedWatch tool.

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New Zealand Dollar gains on easing risk aversion

  • NZD/USD holds strong despite New Zealand’s services sector contracting for a fourth straight month as May’s PSI dropped to 47.5.
  • The US Dollar declines as a US-Iran peace deal eases geopolitical tensions, lowering global inflation and interest rate concerns.
  • Iran stated final talks depend on US compliance, demanding an immediate and complete end to the maritime blockade.

NZD/USD gains ground after registering minor losses in the previous day, trading around 0.5850 during the Asian hours on Monday. The pair remains stronger as the New Zealand Dollar (NZD) holds ground following the release of domestic economic data.

New Zealand’s services sector continues to struggle, as the BusinessNZ Performance of Services Index (PSI) fell to 47.5 in May, down from a revised 48.7 in April. This marks the fourth consecutive month of contraction for the sector.

Concurrently, the broader economy is showing signs of a deeper slowdown. The Performance of Composite Index dropped from a revised 49.2 to 48.4, signaling its third straight month of contraction and its steepest decline since June 2025.

The NZD/USD pair appreciates as the US Dollar (USD) declines after the United States (US) and Iran had reached a deal to end their conflict, easing concerns about inflation and higher interest rates.

Washington and Tehran said on Sunday that they have reached an agreement that will take effect on Friday. US President Donald Trump stated that the US is lifting its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.

The United Kingdom (UK), France, Germany ‌and Italy said that the countries were prepared to lift sanctions on Iran in response to steps on its nuclear program after the US and Iran reached a deal to end their war.

Iran’s National Security Council confirmed a ceasefire agreement with the US, adding that final deal talks will start after the other party fulfills commitments under the memorandum of understanding. Iranian officials said the maritime blockade against Iran should end immediately and entirely.

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United States Dollar Index drops as safe-haven demand fades

  • US Dollar Index declines on fading safe-haven demand as a US-Iran deal eases inflation and interest rate concerns.
  • Washington and Tehran announced Sunday they have reached a peace agreement, which will officially take effect this coming Friday.
  • The CME FedWatch tool shows December Fed rate hike odds falling to nearly 27% after the peace deal.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is losing ground and trading around 99.50 during the Asian hours on Monday. The Greenback declines on fading safe-haven demand following reports that the United States (US) and Iran reached a deal to end their conflict, easing concerns about inflation and higher interest rates.

Washington and Tehran said on Sunday that they have reached an agreement that will take effect on Friday. US President Donald Trump stated that the US is lifting its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.

The United Kingdom (UK), France, Germany ‌and Italy said that the countries were prepared to lift sanctions on Iran in response to steps on its nuclear program after the US and Iran reached a deal to end their war.

Iran’s National Security Council confirmed a ceasefire agreement with the US, adding that final deal talks will start after the other party fulfills commitments under the memorandum of understanding. Iranian officials said the maritime blockade against Iran should end immediately and entirely.

The CME FedWatch tool indicates that the markets are pricing in nearly a 27% probability of a US Federal Reserve (Fed) interest rate hike in December this year after the peace deal, down from 40% a week ago.