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GBP/USD – UK political uncertainty calls fresh leg of downfall ahead

  • GBP/USD trades lower to near 1.3220 on renewed UK political uncertainty.
  • US President Trump says UK PM Starmer could resign on failing to fix immigration and energy issues.
  • The Fed is expected to deliver at least two interest rate hikes this year.

The GBP/USD pair recovers some of its early losses, but is still 0.1% down to near 1.3220 during the early European trading session on Monday. The pair remains under pressure amid renewed United Kingdom (UK) political uncertainty after comments from United States (US) President Donald Trump that Prime Minister (PM) Keir Starmer could resign on failing to fix immigration and energy issues.

“Keir Starmer will resign as Prime Minister of The United Kingdom. He failed badly on two very important subjects- IMMIGRATION AND ENERGY (OPEN NORTH SEA OIL!). I wish him well!,” US President Trump wrote in a post on Truth Social.

Meanwhile, calls from Labour lawmakers against PM Starmer continuing UK leadership have also accelerated, following Andy Burnham’s strong win in the Makerfield constituency in north-west England.

A Reuters report has shown that UK PM Starmer could decide as early as Monday whether to remain in office and fight a leadership contest or begin the process of stepping down.

Also, an upbeat US Dollar (US) due to increased expectations that the Federal Reserve (Fed) could deliver two interest rate hikes this year is also keeping Cable under pressure. According to the CME FedWatch tool, the odds of the Fed delivering at least two interest rate hikes this year is 58.5%, a sharp increase from 17.1% seen a week ago.

Hawkish Fed bets have strengthened following the first monetary policy announcement on Wednesday under new Chairman Kevin Warsh.

GBP/USD technical analysis

Bias: GBP/USD trades lower at around 1.3218 at press time. The pair maintains a bearish near-term tone as it holds below the 20-period Exponential Moving Average (EMA) at 1.3360. Also, a breakdown of the Symmetrical Triangle strengthens the bearish bias. The Relative Strength Index (RSI) near 34 hovers just above oversold territory, hinting at a dominant downside momentum.

Resistance: On the topside, initial resistance is seen at the broken rising trend-line region near 1.3250, followed by the 20-period EMA at 1.3360.

Support: On the downside, the pair could slide towards the November 25 low at 1.3096 if it resumes its decline below the June 19 low at 1.3163. The pair could extend its decline towards the psychological support at 1.3000 once it falls below 1.3096.

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Euro: Consolidation before potential slide against US Dollar – UOB

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight that EUR/USD remains under pressure after briefly dipping to 1.1416 before rebounding. They see scope for short-term consolidation between 1.1435 and 1.1495 as oversold conditions unwind, but maintain a bearish bias toward 1.1410, and warn that a break of the 1.1390/1.1410 support zone could open the way to 1.1210.

Oversold Euro pauses within range

“24-HOUR VIEW: When EUR was at 1.1460 in the early Asian session last Friday, we indicated that “conditions are deeply oversold, but there is scope for EUR to drop below the support at 1.1445.” However, we held the view that “the major support at 1.1410 is unlikely to come under threat.” EUR subsequently dropped to a low of 1.1416, rebounding to close at 1.1468 (+0.10%). Downward momentum is slowing, and conditions are unwinding from oversold levels. In other words, instead of continuing to decline, EUR is more likely to consolidate today, probably between 1.1435 and 1.1495”

“1-3 WEEKS VIEW: Last Thursday (18 Jun, spot at 1.1505), we highlighted that while EUR “is expected to remain under pressure, but it may need some time to consolidate before making a move to 1.1445.” After EUR dropped to 1.1450, we highlighted on Friday (19 Jun, spot at 1.1460) that “a breach of 1.1445 will not be surprising, and the next technical target is 1.1410.” EUR subsequently declined to a low of 1.1416 before rebounding. While there is still scope for EUR to decline to 1.1410, oversold short-term conditions could lead to 1-2 days of consolidation first. Overall,

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Russian Ruble: Hawkish central bank and limited FX impact – Commerzbank

Commerzbank’s Michael Pfister notes that the Russian Central Bank surprised markets by cutting rates only 25 bps to 14.25%, instead of the 50 bps expected, signalling a hawkish stance and caution on further easing. However, he argues this offers little support for the Russian Ruble (RUB), given capital controls, indirect pricing via Chinese Yuan (CNY) and US Dollar (USD), and the dominance of war and energy shocks for RUB performance.

Hawkish cut fails to lift RUB

“Instead of cutting rates by 50 basis points, they were cut by just 25 to 14.25%, accompanied by a statement that a decision on whether to implement further rate cuts would first have to be made at forthcoming meetings. This was thus a strong hawkish signal.”

“As expected, this did little to help the rouble. If the rouble were a freely tradable currency, such a signal would have triggered a rally despite considerable political pressure.”

“But the rouble is no longer freely tradable; it is now quoted solely via indirect links through the CNY-RUB and USD-CNY exchange rates.”

“Consequently, even if the central bank were to halt interest rate cuts in the near future, it would do the currency little good. As no real capital inflows are possible, market participants find it difficult to benefit from the higher interest rate, and the rouble cannot appreciate either.”

“The rouble only appreciates when there are prospects of an imminent end to the war (coupled with the hope that sanctions will be eased), or in the event of a significant energy price shock, as we have seen in recent months. Monetary policy cannot change this.”

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Swiss Franc remains subdued nearly seven-month lows

  • USD/CHF holds gains at a nearly seven-month high of 0.8091.
  • The US Dollar gains support as a renewed US-Iran peace deal lifts safe-haven demand.
  • The SNB will sell Swiss Francs if rapid appreciation threatens price stability.

USD/CHF remains stronger for the fourth consecutive day, trading around 0.8080 during the Asian hours on Monday. The pair remains close to a nearly seven-month high of 0.8091, reached on June 19, as the US Dollar (USD) receives support from safe-haven demand, which could be attributed to renewed concerns over a US-Iran peace deal.

CNBC reported on Sunday that US President Donald Trump threatened direct strikes on Iran if Hezbollah continues its attacks on Israel. This warning has severely clouded the outlook for diplomatic progress between Washington and Tehran, completely dismantling the current peace framework, even as Vice President JD Vance met with Iranian officials for the first round of talks under an interim deal.

Meanwhile, Tehran simultaneously announced it had once again closed the strategic Strait of Hormuz. While Iranian state media reported that Tehran had completely suspended negotiations in response to Trump’s remarks, sources close to the matter indicated that discussions are quietly ongoing.

Moreover, the Greenback receives support as the Federal Reserve (Fed) adopted a decidedly hawkish tone after keeping interest rates steady last week. Notably, 9 out of 19 Fed policymakers now project at least one interest rate hike this year, with market investors pricing in a potential increase as early as September.

Swiss National Bank (SNB) President Martin Schlegel reaffirmed the central bank’s readiness to intervene in the foreign exchange market, stating they will sell Swiss francs (CHF) if rapid appreciation threatens price stability.

With inflation remaining subdued within the 0–2% target range and minimal upward pressure ahead, the SNB held its policy rate steady for a fourth straight meeting, indicating no near-term plans to tighten policy.

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EUR/USD Price Forecast: Loses traction to near 1.1450 as bearish trend tests lower Bollinger support

  • EUR/USD declines to near 1.1465 in Monday’s early European session. 
  • The pair keeps the bearish vibe, downside pressure prevails with RSI holding below the midline. 
  • The first downside target to watch is 1.1450; the immediate resistance level emerges at 1.1570. 

The EUR/USD pair loses ground to around 1.1465 during the early European session on Monday. The uncertainty surrounding the US-Iran peace deal, following threats from President Donald Trump to restart the war in the Middle East, weighs on the riskier assets such as the Euro (EUR) against the US Dollar (USD).  

On Monday, Qatar and Pakistan issued a joint statement on the conclusion of negotiations between the US and Iran in Bürgenstock, Switzerland, saying that talks were conducted in a positive, constructive atmosphere. Meanwhile, Pakistani and Qatari mediation yields significant progress to end the Lebanon conflict, adding that oil and petrochemical exports are exempt, the blockade is removed, some frozen assets are freed, and a major reconstruction and development plan is initiated for Iran. 

On the other hand, hawkish remarks from European Central Bank (ECB) officials might help limit the USD’s losses. On Friday, ECB policymaker and the head of Belgium’s central bank, Pierre Wunsch, said that the central bank may raise interest rates one more time as soon as next month if it sees more evidence of Eurozone inflation spreading beyond energy. 

The ECB’s deposit rate currently stands at 2.25%, and financial markets expect additional 25 basis point hikes in September or October, possibly followed by one more in the early months of next year.

Chart Analysis EUR/USD

Technical Analysis:

In the daily chart, EUR/USD keeps a clear bearish bias as spot holds well below the 100-day simple moving average (SMA) and the Bollinger middle band. Price is nearing the lower Bollinger band support while the Relative Strength Index (RSI) at about 34 drifts towards oversold territory, which suggests persistent downside pressure but also warns that selling momentum could start to fatigue near current levels.

On the downside, the immediate cushion emerges at the lower Bollinger band near 1.1450; a sustained break under this level would open the door toward fresh lows in the broader downtrend. On the topside, initial resistance is seen at the Bollinger middle band around 1.1570, followed by the 100-day SMA at 1.1665 and the upper Bollinger band near 1.1695, with the pair needing to reclaim at least the mid-band to ease the prevailing bearish tone.

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Canadian Dollar hits 14-month lows due to safe-haven demand, lower oil prices

  • USD/CAD reached a 14-month high of 1.4191 on Monday.
  • The Greenback rises on increased safe-haven demand amid renewed US-Iran peace deal concerns.
  • The Canadian Dollar falls as Oil prices drop following a 60-day US-Iran peace roadmap brokered by Qatar and Pakistan.

USD/CAD extends its gains for the fifth successive day, trading around 1.4190 during the Asian hours on Monday. The pair hits a 14-month high of 1.4191 as the US Dollar (USD) receives support from safe-haven demand, which could be attributed to renewed concerns over a US-Iran peace deal. Traders will likely observe Canada’s Consumer Price Index (CPI) data due later in the North American session.

CNBC reported on Sunday that US President Donald Trump threatened direct strikes on Iran if Hezbollah continues its attacks on Israel. This warning has severely clouded the outlook for diplomatic progress between Washington and Tehran, completely dismantling the current peace framework, even as Vice President JD Vance met with Iranian officials for the first round of talks under an interim deal.

Meanwhile, Tehran simultaneously announced it had once again closed the strategic Strait of Hormuz. While Iranian state media reported that Tehran had completely suspended negotiations in response to Trump’s remarks, sources close to the matter indicated that discussions are quietly ongoing.

Moreover, the Greenback receives support as the Federal Reserve (Fed) adopted a decidedly hawkish tone after keeping interest rates steady last week. Notably, 9 out of 19 Fed policymakers now project at least one interest rate hike this year, with market investors pricing in a potential increase as early as September.

As Canada’s largest crude exporter to the United States (US), the commodity-linked Canadian Dollar (CAD) faced downward pressure from falling oil prices. Crude surrendered its daily gains following positive developments in the US-Iran peace talks. Mediators Qatar and Pakistan announced in a joint statement from Switzerland that both nations have agreed to a formal roadmap aimed at securing a final peace agreement within the next 60 days.

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Australian Dollar remains weak near 0.7000 on Middle East peace doubts

  • AUD/USD softens to around 0.7005 in Monday’s early European session. 
  • Uncertainty clouded the US-Iran peace deal following threats from Trump. 
  • RBA hawkish pause could underpin the Aussie. 

The AUD/USD pair loses traction to near 0.7005 during the early European trading hours on Monday, pressured by risk-off sentiment. Traders continue to assess the developments surrounding the US-Iran peace deal following fresh threats from US President Donald Trump. 

The US-Iran peace talks took place on Sunday in Bürgenstock, Switzerland, with delegations from Iran, the US, Qatar, and Pakistan participating. On Monday, Qatar and Pakistan issued a joint statement on the conclusion of negotiations, saying that talks were conducted in a positive, constructive atmosphere.

Earlier on Monday, the Tasnim news agency cited an Iranian Foreign Ministry spokesman as saying that “a formal transit mechanism was successfully arranged to guarantee the safe passage of commercial vessels through the vital Strait of Hormuz waterway.”

However, markets remain cautious since Trump over the weekend threatened strikes on Iran if Hezbollah keeps attacking Israel. Uncertainty surrounding the US-Iran peace agreement could weigh on the riskier asset, such as the Australian Dollar (AUD) against the US Dollar (USD). 

On the other hand, a hawkish interest rate hold from the Reserve Bank of Australia (RBA) might help limit the Aussie’s losses. The RBA decided to leave the Official Cash Rate (OCR) unchanged at 4.35% after its June monetary policy meeting last week. This is a pause following three consecutive 25 basis points (bps) rate hikes earlier this year. 

Despite leaving the interest rate unchanged, the board members signaled that further rate hikes might be necessary to achieve its goals.

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New Zealand Dollar Hits 11-Week Low

The New Zealand dollar fell to around $0.572, the lowest in eleven weeks, weighed down by a firm US dollar. The greenback strengthens amid increased bets on a US rate hike following the Federal Reserve’s hawkish signals. Meanwhile, US–Iran talks in Switzerland have made encouraging progress, with technical-level discussions set to continue this week, easing earlier concerns after President Donald Trump again warned of strikes on Iran over its support for Hezbollah. New Zealand’s GDP data released last week suggested that economic recovery was gaining momentum. However, the figures largely reflected conditions prior to the escalation in Middle East conflict. As a result, forecasts show GDP to barely grow or even contract in the second quarter. Markets continue to price in a 25-bps hike in July given the RBNZ’s hawkish outlook, though swap pricing imply only two increases this year rather than the three previously expected.