The dollar index climbed above 101 on Monday, rising for the second straight session as escalating tensions in the Middle East fueled safe-haven demand for the currency. The US and Iran exchanged fresh missile strikes over the weekend amid ongoing disputes over shipping through the Strait of Hormuz, pushing oil prices higher and reinforcing expectations of interest-rate hikes to contain inflation. Investors are also awaiting key US inflation data this week for further clues on the Federal Reserve’s policy outlook. Markets currently expect the Fed to deliver one rate increase before the end of the year. Minutes from the Fed’s June meeting, released last week, showed that a few policymakers saw a case for raising rates, though they ultimately supported keeping policy unchanged. Meanwhile, Fed Chair Kevin Warsh is scheduled to make his first appearance before the US Congress on Tuesday and Wednesday.
Yen Weakens on Middle East Tensions
The Japanese yen weakened to around 162 per dollar on Monday, giving back the previous session’s gains as escalating tensions in the Middle East pressured the currency. The US and Iran exchanged fresh missile strikes over the weekend amid ongoing disputes over shipping through the Strait of Hormuz, driving oil prices higher and reinforcing expectations of interest-rate hikes to curb inflation. Japan’s economy and currency remain particularly vulnerable to higher oil prices due to the country’s heavy reliance on crude imports from the Middle East. The yen also faced additional pressure from a stronger dollar, which continued to attract safe-haven demand amid the geopolitical crisis. Last Friday, the yen surged after Finance Minister Satsuki Katayama said the government would encourage domestic pension funds to increase their allocations to Japanese financial assets.
Kiwi Dollar Near 3-Week Highs
The New Zealand dollar held around $0.576 on Monday, hovering near its highest level in more than three weeks, supported by expectations of further interest rate hikes from the Reserve Bank. Swaps traders are pricing in nearly two additional quarter-point rate hikes from the Reserve Bank of New Zealand by year-end, following the central bank’s hawkish stance and strong manufacturing data last week. Additional support came from fresh data showing that New Zealand’s services sector returned to expansion in June for the first time since January, reinforcing the view that the economy is regaining momentum. However, escalating tensions in the Middle East are weighing on risk sentiment and limiting the kiwi’s gains. The US and Iran exchanged heavy missile and drone strikes over the weekend, with Tehran targeting US facilities across the Gulf and claiming it had once again closed the Strait of Hormuz.
Three markets to watch next week
The past week brought a sharp bout of volatility to global markets, particularly within the commodities sector.
An initial rebound in crude prices, fueled by escalating tensions in the Middle East, reverberated with redoubled force across weather-sensitive agricultural commodities. Markets enter the new week with attention firmly fixed on the United States. The macroeconomic calendar is packed with pivotal events poised to shape investor sentiment over the coming days.
The main highlights include the release of US consumer price index (CPI) data for June, congressional testimony by the newly appointed Fed Chair Kevin Warsh, and the official kickoff of the Wall Street earnings season. Given this confluence of catalysts, three markets warrant close scrutiny in the near term: GOLD , US500 and COCOA .
GOLD
This week, investor focus in the gold market will shift entirely toward the US dollar and the interest rate outlook, both of which face two powerful catalysts. On Tuesday, the US June CPI reading will be released, with consensus expectations pointing to a moderate deceleration in price growth. Following the release of the FOMC minutes, the market will pivot to the next Warsh-related event: the Fed Chair’s semi-annual testimony before Congress. Warsh will appear before the House Financial Services Committee on Tuesday, followed by questioning from the Senate Banking Committee on Wednesday.
Historically, during leadership transitions at the Federal Reserve, markets closely parse every word for clues regarding the future path of monetary policy. Hints of a more dovish tilt would provide potent fuel for a rally in gold, whereas unyielding hawkish rhetoric could unleash heavy selling pressure. However, it is worth noting that Warsh himself has signaled he does not intend to offer forward guidance to the markets. Consequently, the market’s own interpretation of his remarks will be critical.
US500 (S&P 500 Futures)
For the US equity market and its benchmark S&P 500 index, this week marks the commencement of another crucial corporate earnings season. Traditionally, the cycle kicks off with Wall Street’s banking giants; JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, and Bank of America are all scheduled to report on Tuesday.
Beyond financials, investors will closely dissect earnings from tech heavyweights ASML and TSMC (Wednesday and Thursday) as well as Netflix (Thursday). Juxtaposing these corporate results with Wednesday’s release of the Federal Reserve’s Beige Book and Thursday’s US retail sales data will provide a more comprehensive economic mosaic. This will allow market participants to gauge whether the US economy and its consumers remain resilient enough to sustain corporate earnings capable of justifying today’s stretched equity valuations.
COCOA
Cocoa has enjoyed a spectacular first half of the year. Following a sharp sell-off early on, the soft commodity is currently staging a massive rebound. While current prices remain below the historic highs printed in 2024, they have surged by roughly 60% since the El Niño weather phenomenon was officially declared last month. Measured from its recent troughs, the pace of the rebound reaches as high as 120%. Violent volatility in recent days has been driven by supply anxieties out of West Africa, where cocoa crop development was initially hit by torrential rains, and plantations are now threatened by the hot, dry conditions associated with El Niño.
Furthermore, the ICE exchange raised margin requirements in response to market instability, a move that only exacerbated swings and forced the capitulation of some speculative capital. This week will prove pivotal for investors in this market as attention shifts from weather patterns to hard demand data. Crucial quarterly European cocoa grindings data is due on Thursday.
A recent report from industry giant Barry Callebaut did register the first increase in sales volumes in over two years—partly driven by an earlier price correction—but the company simultaneously warned that global confectionery consumption remains under pressure. Following such a monumental rally from its lows, the upcoming grindings data will serve as an absolute litmus test of whether high prices have triggered genuine demand destruction, or if the market still has room to run.
Forecasting the upcoming week: US CPI and Warsh testimony to test the Dollar’s recovery
The upcoming week will bring a major test for the US Dollar (USD), with investors focusing on the United States Consumer Price Index (CPI), Federal Reserve (Fed) Chair Kevin Warsh’s congressional testimony and a broad set of activity indicators. China’s second-quarter Gross Domestic Product (GDP) and the Bank of Canada’s (BoC) interest-rate decision will also attract significant attention.
The US Dollar Index (DXY) trades near 101.00, recovering from a one-week low hit earlier on Friday as investors balance softer recent labor market data against renewed geopolitical uncertainty and persistent inflation concerns. Tuesday’s US CPI report will be the central event for the Greenback.
Headline CPI is expected to decline 0.1% MoM in June, following a 0.5% increase in May, while annual inflation previously stood at 4.2%. Core CPI is forecast to rise 0.3% MoM, up from 0.2%, while the annual core rate is expected to remain unchanged at 2.9%.
On another note, Fed Chair Warsh will testify on Tuesday and Wednesday, giving markets an opportunity to assess how policymakers balance elevated inflation against signs of weaker hiring. Comments from several Fed officials and the release of the Beige Book will provide additional guidance.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | 0.07% | -0.42% | -0.08% | -0.17% | -0.14% | 0.21% | |
| EUR | -0.12% | -0.05% | -0.54% | -0.19% | -0.30% | -0.27% | 0.09% | |
| GBP | -0.07% | 0.05% | -0.50% | -0.13% | -0.25% | -0.23% | 0.13% | |
| JPY | 0.42% | 0.54% | 0.50% | 0.34% | 0.25% | 0.25% | 0.60% | |
| CAD | 0.08% | 0.19% | 0.13% | -0.34% | -0.10% | -0.08% | 0.27% | |
| AUD | 0.17% | 0.30% | 0.25% | -0.25% | 0.10% | 0.02% | 0.35% | |
| NZD | 0.14% | 0.27% | 0.23% | -0.25% | 0.08% | -0.02% | 0.34% | |
| CHF | -0.21% | -0.09% | -0.13% | -0.60% | -0.27% | -0.35% | -0.34% |
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).
EUR/USD trades lower near 1.1420, retreating as the US Dollar recovers from its weekly low, and is set to finish the week with a 0.19% loss. The pair will remain highly sensitive to US CPI and Warsh’s testimony, while the European calendar includes industrial production and final inflation figures.
GBP/USD trades near 1.3400, with a weekly gain of around 0.34% after reaching a three-week high. The Pound Sterling (GBP) faces an important domestic calendar, with United Kingdom (UK) GDP, industrial production, and manufacturing output due on Thursday. UK GDP is expected to grow 0.1% MoM in May, following a 0.1% contraction. Industrial production is forecast to rise 0.1%, while manufacturing production is expected to decline 0.1% after increasing 0.4% previously.
USD/JPY trades lower near 161.70 on Friday but is set to close the week with a 0.24% gain. The pair will remain driven by US Treasury yields, Fed expectations, and concerns over possible intervention by Japanese authorities. A hotter-than-expected US CPI report could lift yields and revive upward pressure on USD/JPY. Softer inflation could extend the pair’s decline and offer further support to the Japanese Yen.
AUD/USD trades slightly higher near 0.6950, supported by a softer broader US Dollar backdrop and recent strength in the Chinese Yuan. However, the Aussie’s direction next week will depend heavily on Chinese economic data and US inflation. Wednesday’s Chinese GDP report is expected to show the economy expanding 4.4% YoY in the second quarter, slowing from 5%. Quarterly growth is forecast at 0.9%. Industrial production is expected to rise 4.7%, while retail sales are projected to decline 0.1% YoY.
USD/CAD trades lower near 1.4150 ahead of Wednesday’s Bank of Canada policy decision. The BoC is expected to leave its benchmark rate unchanged at 2.25%. The accompanying Monetary Policy Report, policy statement and press conference will be closely examined for guidance on inflation, domestic demand and future rate moves. A hawkish message could extend USD/CAD’s decline, while a cautious stance may limit the Canadian Dollar’s strength.
West Texas Intermediate (WTI) Oil trades muted near $71.60 per barrel as investors assess the risk of renewed supply disruptions linked to tensions between the United States and Iran. Oil prices could become more volatile if diplomatic efforts deteriorate further or concerns surrounding Middle Eastern supply routes intensify. However, signs of weaker global demand, particularly from China, may limit gains.
Gold trades lower near $4,102, losing ground as the US Dollar recovers and investors prepare for the US inflation report. The precious metal remains supported by geopolitical uncertainty, although higher Treasury yields could create additional pressure.
Anticipating economic perspectives: Voices on the horizon
Monday, July 13:
- Fed’s Bowman
- Fed’s Waller
- ECB’s Schnabel
- BoE’s Pill
Tuesday, July 14:
- Fed’s Warsh
- Fed’s Barr
- Fed’s Goolsbee
- Fed’s Cook
- Fed’s Bowman
- BoE’s Bailey
Wednesday, July 15:
- Fed’s Williams
- Fed’s Chair Warsh
- ECB’s Nagel
- Fed’s Cook
- Fed’s Musalem
Thursday, July 16:
- Fed’s Logan
- Fed’s Schmid
- Fed’s Jefferson
Friday, July 17:
- ECB’s Cipollone
Central banks’ meetings and upcoming data releases to shape
The main monetary-policy event will be the Bank of Canada interest-rate decision on Wednesday, July 15. The central bank is expected to leave its policy rate unchanged at 2.25%.
The BoC will also publish its Monetary Policy Report and policy statement, followed by a press conference. No interest-rate decisions are scheduled from the Fed, ECB, BoE, BoJ, RBA or RBNZ.
Trade of The Day – AUD/JPY
period moving average
Recommendation: Trade: Short AUDJPY at market price Target: 111.36, 110.75 Stop: 113.06
Opinion:
Looking at AUDJPY on the H4 interval, one can see that the pair is trying to return to the main trend. Bulls did not manage to break above the key resistance at 112.66, and sellers took over. The aforementioned resistance is a result of an upper limit of 1:1 structure. According to the Overbalance strategy, as long as the price sits below it, one should expect the price to go lower. In addition, the price sits below the 200-period moving average which confirms the bearish sentiment. We recommend going short AUDJPY at market price with two targets: 111.36, 110.75 We also recommend placing a stop loss order at 113.06.
Source: xStation5
