The Indian rupee hovered around 95.2 per dollar, pausing recent losses after multi-week lows as investors assessed persistent dollar demand, Reserve Bank of India intervention, and broader weakness in Asian currencies. The local currency’s outlook weakened after it fell nearly 1% last week, pressured by arbitrage-related outflows, routine importer demand for US dollars, and a stronger greenback amid expectations that the Federal Reserve could keep interest rates higher for an extended period. Although the dollar eased following a softer-than-expected June employment report, traders expect only limited relief for the rupee. While lower crude oil prices offered support, persistent dollar demand has limited the rupee’s recovery, even as the central bank continues to smooth volatility through dollar sales. Globally, attention is on the Fed’s latest meeting minutes and the upcoming US inflation report, both of which could shape interest rate expectations and the dollar’s direction.
GBP flat lines around mid-1.3300s vs USD amid Iran tensions
- GBP/USD opens the new week on a subdued note amid a mixed fundamental backdrop.
- Hormuz risks offer support to the safe-haven USD, capping the upside for spot prices.
- Traders look to the UK Construction PMI and the US ISM Services PMI for a fresh impetus.
The GBP/USD pair struggles to capitalize on last week’s strong move higher and oscillates in a narrow band, around the 1.3350 area during the Asian session on Monday. Moreover, spot prices remain below a technically significant 200-day Simple Moving Average (SMA), warranting caution before positioning for an extension of the recent recovery from the 1.3140 zone, or the year-to-date low touched in June.
The US Dollar (USD) kicks off the new week on a positive note amid renewed tensions over the critical Strait of Hormuz and turns out to be a key factor acting as a headwind for the GBP/USD pair. In fact, Iran’s ambassador to China said on Saturday that Tehran plans to introduce new service fees for ships passing through the strategically important waterway. His remarks come despite the US rejecting the idea of Iran charging vessels for using the strait. This keeps the geopolitical risk premium in play and benefits the Greenback’s safe-haven status.
Meanwhile, traders trimmed their bets for interest rate hikes by the US Federal Reserve (Fed) in the wake of unimpressive US monthly employment details, released last Thursday, which pointed to softening labor conditions. Furthermore, easing inflation fears in the face of the recent slump in Crude Oil prices temper market expectations of higher-for-longer interest rates. The resultant shift in bets for zero and one Fed rate hike in 2026, from one to two rate increases, holds back USD bulls from placing aggressive bets and lends support to the GBP/USD pair.
The British Pound (GBP), on the other hand, benefits from commitment from Andy Burnham – the frontrunner to succeed Keir Starmer as UK Prime Minister – to adhere to strict borrowing rules. The GBP bulls, however, seem hesitant as mixed UK PMIs last week pointed to a significant economic slowdown, led by the dominant services sector. This could cap the GBP/USD pair as traders now look to the UK Construction PMI. Meanwhile, the US economic docket highlights the ISM Services PMI, which could provide some impetus later during the North American session.
Japanese Yen weakens under high import costs despite JGB yield hitting 30-year highs
- USD/JPY rises as the Japanese Yen falls amid high import costs.
- 10-year JGB yield reaches a fresh 30-year high of 2.79%.
- The US Dollar remains strong as markets price in multiple Fed rate hikes this year.
USD/JPY extends its gains for the second successive day, trading around 161.70 during the Asian hours on Monday. The Japanese Yen (JPY) is caught in a high-stakes tug-of-war, buckling under surging import costs even as 10-year JGB yields hit a fresh 30-year high of 2.79%. This deep market divide has traders on high alert for immediate verbal intervention from Tokyo.
The USD/JPY pair appreciates as the US Dollar (USD) holds its ground, buoyed by market expectations of multiple Federal Reserve (Fed) rate hikes later this year. This comes despite easing global inflation concerns, which have been helped by oil flows normalizing through the critical Strait of Hormuz.
The CME FedWatch tool shows financial markets are pricing in a 77.3% chance of interest rate hikes by year-end. Investors are now looking ahead to Wednesday’s release of the Fed’s June policy Meeting Minutes to gain clearer insights into the future path of interest rates.
Recent US labor data have forced Wall Street to aggressively rethink this hawkish outlook. The latest Nonfarm Payrolls (NFP) report revealed the US economy added a mere 57,000 jobs last month, severely missing the market’s forecast of 110,000. While the headline unemployment rate did manage an unexpected drop to 4.2% from May’s 4.3%, the dramatic hiring slowdown strongly signals that the broader economy is cooling down.
Fed Chair Kevin Warsh firmly reaffirmed the central bank’s independent commitment to its 2% price stability target. Notably, he also acknowledged that inflation risks and expectations have finally begun to moderate over the past month.
New Zealand Dollar declines as NZIER splits on July decision
- NZD/USD falls as a 1.0% drop in June’s ANZ Commodity Price Index weakened the NZD.
- The NZD faces volatility as an evenly split NZIER shadow board creates deep uncertainty ahead of the July policy decision.
- The US Dollar advances as markets continue to price in multiple Fed rate hikes this year.
NZD/USD depreciates after two days of gains, trading around 0.5690 during the Asian hours on Monday. The pair loses ground as the New Zealand Dollar (NZD) weakens following the ANZ World Commodity Price Index, which fell 1.0% in June as easing Middle East tensions and lower oil prices weighed.
The New Zealand Dollar faces an immediate challenge as NZIER economists look past immediate disagreements to project higher interest rates over the coming year. While the shadow board is nearly evenly split on the upcoming July policy decision, creating genuine uncertainty and potential market volatility, its medium-term outlook remains unified. Regardless of the immediate decision, members firmly agree that the Official Cash Rate (OCR) must climb to a range of 3.00% to 3.25% over the next twelve months, establishing a solid anchor for interest rate expectations.
In line with this hawkish medium-term trajectory, ANZ anticipates the Reserve Bank of New Zealand (RBNZ) will raise the OCR by 25 basis points to 2.50% next Wednesday. Despite a sharp decline in global oil prices, ANZ maintains that persistent inflation risks and a weakened domestic currency warrant immediate action. They argue that delivering a neutral-to-dovish rate hike provides the RBNZ with the most comfortable tactical footing to navigate current economic pressures without overly roiling the markets.
The NZD/USD pair depreciates as the US Dollar (USD) rises, as traders expect multiple Federal Reserve (Fed) rate hikes later this year. This comes despite easing global inflation concerns, which have been helped by oil flows normalizing through the critical Strait of Hormuz.
The CME FedWatch tool shows financial markets are pricing in a 77.3% chance of interest rate hikes by year-end. Investors are now looking ahead to Wednesday’s release of the Fed’s June policy Meeting Minutes to gain clearer insights into the future path of interest rates.
Canadian Dollar weakens despite higher oil prices
- USD/CAD may decline as the commodity-linked Canadian Dollar may receive support from higher oil prices.
- OPEC+ approved an 188,000-barrel-per-day output hike led by Saudi Arabia and Russia, signaling confidence in regional stability.
- The US Dollar strengthens as markets expect multiple Fed rate hikes this year.
USD/CAD gains ground for the second consecutive day, trading around 1.4210 during the Asian hours on Monday. The upside of the pair could be restrained as the commodity-linked Canadian Dollar (CAD) could receive support from higher oil prices.
Oil traders are moving cautiously while traffic through the Strait of Hormuz appears to be stabilizing; expected production hikes from OPEC+ (The Organization of Petroleum Exporting Countries and its allies (OPEC+), including Russia) have renewed fears of a global supply glut.
Several tankers made unexplained detours on Saturday, and shipping lanes through the critical chokepoint normalized by Sunday. Meanwhile, OPEC+ approved a modest output hike of 188,000 barrels per day for next month, led by Saudi Arabia and Russia, a move signaling confidence in regional stability.
The USD/CAD pair appreciates as the US Dollar (USD) rises, as traders expect multiple Federal Reserve (Fed) rate hikes later this year. This comes despite easing global inflation concerns, which have been helped by oil flows normalizing through the critical Strait of Hormuz.
The CME FedWatch tool shows financial markets are pricing in a 77.3% chance of interest rate hikes by year-end. Investors are now looking ahead to Wednesday’s release of the Fed’s June policy Meeting Minutes to gain clearer insights into the future path of interest rates.
Dollar Holds Losses on Easing Rate Hike Bets
The dollar index remained below 101 on Monday after posting weekly losses, as softer-than-expected US jobs data and lower oil prices led traders to scale back expectations for Federal Reserve interest rate hikes. Data released last week showed US nonfarm payrolls increased by just 57,000 in June, the smallest gain in four months and well below forecasts of 110,000, prompting markets to reduce bets on a September rate hike. Oil prices also edged lower as recovering energy flows through the Strait of Hormuz and the prospect of higher OPEC+ output fueled concerns about a potential supply glut. That has helped ease inflationary pressures that had previously bolstered expectations of further rate hikes. Investors now await the minutes of the Federal Reserve’s June policy meeting later this week for fresh clues on the outlook for interest rates.
Australian Dollar remains on the front foot vs weaker USD after China Services PMI
- AUD/USD attracts buyers for the second straight day as receding Fed hike bets undermine the USD.
- Spot prices move little following the release of rather unimpressive China’s RatingDog Services PMI.
- Geopolitical risks hold back the USD bears from placing aggressive bets, capping gains for the major.
The AUD/USD pair turns positive for the second straight day following a modest Asian session downtick to the 0.6910 region amid the emergence of fresh US Dollar (USD) selling. Spot prices stick to gains following the release of the RatingDog China Services PMI and currently trade around the 0.6930 area, just below a one-and-a-half-week top set on Wednesday.
The gauge eased from a three month high of 54.4 to 54.1 in June. The reading, however, pointed to a continuous expansion in China’s services sector and offers some support to the China-proxy Australian Dollar (AUD). The USD, on the other hand, languishes near a two-week low, touched on Thursday, amid receding US Federal Reserve (Fed) rate hike bets. This turns out to be another factor that contributes to the bid tone surrounding the AUD/USD pair.
The closely-watched US Nonfarm Payrolls (NFP), released on Wednesday, showed that the economy added 57K jobs in June, far below the 110K expected. Moreover, the previous month’s reading was revised down from 172K to 129K, pointing to softening labor conditions and offsetting a downtick in the Unemployment Rate to 4.2% in June. Nevertheless, the data shifted market expectations from one to two Fed rate increases in 2026 to between zero and one hike.
However, persistent geopolitical uncertainties hold back the USD bears from placing aggressive bets and cap the upside for the AUD/USD pair. In fact, the New York Times reported that US officials feared Israel may be hatching a plan to kill Iran’s senior negotiators, which could derail negotiations and trigger renewed fighting. Furthermore, Iran’s military headquarters warned that any US interference in the Strait of Hormuz will be met with a “decisive and swift response.”
Adding to this, relatively thin liquidity on the back of a holiday in the US makes it prudent to wait for strong follow-through buying before positioning for an extension of the AUD/USD pair’s recovery from a three-month low, set earlier this week. Nevertheless, spot prices seem poised to register modest gains for the first time in three weeks and remain at the mercy of USD price dynamics.
New Zealand Dollar remains firm above 0.5700 after Chinese services PMI data
- NZD/USD strengthens to near 0.5705 in Friday’s Asian session.
- China’s RatingDog Services PMI eased to 54.1 in June, vs 54.4
- US NFP increased 57,000 in June, well below expectations of a 110,000 rise.
The NZD/USD pair gathers strength to around 0.5705 during the Asian trading hours on Friday. The New Zealand (NZD) remains strong following the Chinese economic data. The US markets will be closed on Friday in observance of Independence Day.
Data released by RatingDog on Friday showed that China’s Services Purchasing Managers’ Index (PMI) eased slightly to 54.1 in June from 54.4 in May. However, this figure still marked the third-steepest increase in services activity in nearly three years. Services exports grew for a second consecutive month, expanding at the fastest rate since October 2024. The China-proxy Kiwi edges higher following China’s PMI report.
On the central bank’s front, ASB Bank dropped its call for a July hike from the Reserve Bank of New Zealand (RBNZ) and expects the RBNZ to keep the Official Cash Rate (OCR) on hold at the upcoming July meeting, followed by steady 25-basis-point increases starting in September, with the OCR peaking at 3.25% by early 2027.
Signs of a cooling US labor market have prompted financial markets to dial back expectations for a near-term interest rate hike from the US Federal Reserve (Fed), weighing on the Greenback against the NZD. Nonfarm Payrolls (NFP) rose by 57,000 jobs in June, the Labor Department’s Bureau of Labor Statistics reported on Thursday. Economists had forecast payrolls advancing 110,000.
Meanwhile, the Unemployment Rate fell to 4.2% during the same period, down from 4.3% in May. Financial markets are now pricing in nearly a 52% odds of a US rate hike by September, down from 66% before the jobs data, according to the CME FedWatch tool.
