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Indian Rupee surges as oil prices nosedive on US-Iran MoU finalization

  • The Indian Rupee soars against the US Dollar on the finalization of the US-Iran deal.
  • Plunging oil prices due to the reopening of the Strait of Hormuz, as per the post from US President Trump.
  • The selling pressure by overseas investors has slowed down in the last two trading days.

The Indian Rupee (INR) opens strongly against the US Dollar (USD) at the start of the week. The USD/INR pair plunges to near 94.60 as oil prices have nosedived, following the announcement that the United States (US) and Iran have reached a permanent peace deal.

In India’s opening trading hours, the MCX Crude Oil contract expiring on June 18 is down 5.5% to near 7,630, the lowest level seen in almost two weeks.

The appeal of currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, improves significantly when oil prices fall like a house of cards.

US-Iran reaches peace deal

On Sunday, both the US and Iran confirmed that they have finalized a Memorandum of Understanding (MoU).

Iran’s Supreme National Security Council confirmed Sunday that Tehran had finalized an MoU, saying all military operations on all fronts, including Lebanon, would cease “immediately and permanently”, CNBC reported.

US President Donald Trump also said in a post on Truth Social, “I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade.”

Meanwhile, Pakistan Prime Minister (PM) Shehbaz Sharif has stated in a post on X, formerly known as Twitter, that the finalized MoU between the US and Iran will be signed on June 19 in Switzerland.

FIIs selling pressure cool down

Although Foreign Institutional Investors (FIIs) have remained net sellers in all trading days so far in June, a slowdown in the pace of selling pressure is observed in the last two trading days. So far this month, FIIs have offloaded their stake worth Rs. 46,430.42 crore, an average selling of Rs. 4,643 crore in 10 trading days. In the last two trading days, the average selling by overseas investors was Rs. 1,534.63 crore.

India’s WPI Inflation data awaited

On the domestic front, investors await India’s Wholesale Price Index (WPI) Inflation data for May, which will be published at 12:00 PM IST (06:30 GMT). Inflation at the wholesale level is expected to arrive higher at 9.1% from 8.3% in April.

Theoretically, higher inflation at the factory level boosts expectations for the Reserve Bank of India’s (RBI) interest rate hikes in the near-term. However, the impact is expected to be limited as oil prices have started declining, a scenario that would anchor inflation expectations.

Technical Analysis: USD/INR slides to near 94.60

USD/INR tumbles to near 94.60 in the opening trade. The near-term bias of the pair turns bearish as it extends distance with the 20-day exponential moving average (EMA), which is at 95.33, on the downside.

The pair’s slide away from that dynamic barrier keeps the short-term trend under pressure, while the Relative Strength Index (RSI) near 42 leans lower, suggesting sellers retain control despite not yet reaching oversold territory.

On the topside, initial resistance is defined by the 20-day EMA at 95.33, where a sustained break higher would be needed to ease the current downside pressure and open the way for a deeper corrective bounce towards 96.00. Looking down, the pair could slide to the May 7 low at 94.03 if it drops below the May 29 low at 94.46.

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Euro climbs above 1.1600 on US–Iran peace breakthrough

  • EUR/USD edges higher to around 1.1610 in Monday’s early European session. 
  • The US and Iran announced a framework deal for peace. 
  • ECB’s Nagel said the central bank is ready to hike again in July if necessary. 

The EUR/USD pair gains traction to near 1.1610 during the early European trading hours on Monday. The reports that the US and Iran have reached a deal to reopen the Strait of Hormuz improved risk sentiment, supporting the Euro (EUR) against the US Dollar (USD). The US Federal Reserve (Fed) interest rate decision will be in the spotlight later on Wednesday. 

Washington and Tehran have announced a framework deal for peace, which will be signed in Switzerland on Friday. US President Donald Trump said the US is lifting its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.

The Fed is widely expected 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. 

Last week, the European Central Bank (ECB) hiked its key interest rates, saying “the war in the Middle East is generating inflation pressures.” This marks the first rate increase since September 2023, after seven consecutive meetings where interest rates were kept on hold.  

ECB Governing Council member Joachim Nagel said on Friday that the central bank is prepared to raise interest rates for a second straight meeting in July, if the shock from the war in the Middle East requires it. 

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GBP/USD Price Forecast: US-Iran reaches deal supports advance beyond 20-day EMA

  • GBP/USD jumps to near 1.3460 as the market sentiment turns favorable for riskier assets.
  • The finalization of an MoU between the US and Iran has improved the market mood.
  • The Fed and BoE are scheduled to announce their monetary policies on Wednesday and Thursday, respectively.

The GBP/USD pair trades 0.35% higher to near 1.3460 during the late Asian trading session on Monday. The Cable extends its week-long advance as market sentiment improves further, following the announcement that the United States (US) and Iran have reached a deal.

At press time, S&P 500 futures are up over 1% and Asian stock markets are exhibiting a broad rally, reflecting a strong risk appetite of investors. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.4% lower at near 99.40.

Pakistan Prime Minister (PM) Shehbaz Sharif has stated in a post on X, formerly known as Twitter, that the finalized memorandum of understanding (MoU) between the US and Iran will be signed on June 19 in Switzerland.

Meanwhile, investors brace for a volatile week, especially for the British Pound (GBP), as an array of United Kingdom (UK) data, including the labor market report for three months ending in April and the Consumer Price Index (CPI) data for May, along with the Bank of England’s (BoE) monetary policy announcement, will be key events to watch out.

In the US, investors will focus on the Federal Reserve’s (Fed) monetary policy, which will be announced on Wednesday.

GBP/USD technical analysis

GBP/USD trades sharply higher at around 1.3460 as of writing. The near-term bias has turned mildly bullish as it returns above the 20-period exponential moving average (EMA), which is at 1.3425.

The Relative Strength Index (RSI) at about 53 hovers just above the midline, hinting at steady, rather than aggressive, upside momentum while the pair consolidates within this supported backdrop.

On the topside, the primary hurdle is the May 26 high at around 1.3500, followed by the descending resistance trend line, with its break price near 1.3580. On the downside, initial demand would be seen around the 20-EMA at 1.3425, while the upward trend-line support around 1.3327 would remain a key support zone.

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Offshore Yuan Hits Multi-Year High

The offshore yuan strengthened to around 6.75 per dollar on Monday, extending gains from the previous week and reaching its highest level since January 2023, as a reported US-Iran peace breakthrough triggered broad-based dollar weakness and boosted regional currencies. The tentative agreement reportedly includes the reopening of the Strait of Hormuz, a cessation of hostilities, and a framework for negotiations over Iran’s nuclear program. Iranian Deputy Foreign Minister Kazem Gharibabadi also confirmed the agreement, with officials from both countries expected to meet in Switzerland to formally sign the deal. However, key details remain unresolved, while no official text has yet been released. On the domestic front, investors continued to assess the strength of China’s economy following recent signs of uneven growth, particularly industrial production, retail sales, and unemployment figures.

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Trade of The Day: USD/NOK

  • The USDNOK exchange rate ended yesterday’s session above the 100-day exponential moving average (EMA100; purple).
  • Brent crude oil futures (OIL) are losing ground for the second consecutive session, slipping below 90 USD per barrel—their lowest level since April 20, 2026.
  • CPI inflation in Norway fell to 3.1% in May from 3.4% in April.

Recommendation:

  • Position: Long (BUY) on USDNOK at market price
  • Target Price (Take Profit; TP): 9.6540 (TP1), 9.7840 (TP2)
  • Stop Loss (SL): 9.4000

Source: xStation5

Opinion

USDNOK is gaining momentum, increasingly solidifying a trend reversal on a pair whose volatility in recent months was primarily shaped by upward pressure on oil prices. Over the past two weeks, the price crossed three exponential moving averages (the 10-, 30-, and 100-day EMA; yellow, light purple, and dark purple, respectively) and successfully defended support where the EMA100 overlaps with the 50.0 Fibonacci retracement level of the latest downward wave. This technical bullish momentum is also well-supported by geopolitical and macroeconomic realities. Fluctuations in the Trump administration’s stance toward Iran did not trigger significant volatility (by recent months’ standards) in oil contracts, and the cancellation of an attack planned for yesterday contributed to a sharp drop in commodity prices.

This suggests that, for the market, the worst regarding the Strait of Hormuz is already behind us, thereby causing the risk premium for oil-producing countries’ currencies to fade out. Alongside the correlation between the Norwegian krone and oil, the latest inflation reading from Norway indicated a second consecutive drop in CPI, with economists forecasting a further decline in price pressure—particularly in the food sector, which is vital for households and their expectations. Meanwhile, in the US, hawkish expectations are mounting for the Fed (OIS curve imlies 73% chance for a hike bedore the end of 2026), benefiting the greenback. Therefore, the monetary policy trajectories of both economies consistently support a continuation of the upward move in USDNOK. A short-term risk remains the near-overbought condition of the pair. The RSI sits right below the 70-point threshold (currently at 66.4), which may discourage investors from pushing the exchange rate higher without a minor technical correction.

Methodology

The recommendation was prepared based on a technical analysis of the USDNOK chart and a fundamental analysis of the discussed economies (monetary policy in Norway and the US), as well as the exchange rate’s correlation with crude oil prices. The direction of the recommendation was determined using moving averages and market expectations regarding Fed policy. The Take Profit and Stop Loss levels were set using Fibonacci retracements and price action (TP1 and TP2 at the 78.6 and 100 Fibo levels of the last downward wave; SL at the 38.2 Fibo level).

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Euro: Seen drifting toward 1.1400 against US Dollar – BBH

Brown Brothers Harriman’s Elias Haddad reports that EUR/USD briefly dipped toward 1.1500 after the ECB decision before rebounding on the US-Iran breakthrough. Haddad expects EUR/USD to edge lower and stabilize closer to 1.1400 as US growth outperforms the Eurozone. The ECB’s 25 bps hike and hawkish inflation stance are seen cushioning, but not reversing, Euro downside.

Euro pressured by weaker growth outlook

“EUR/USD dipped towards 1.1500 following yesterday’s ECB policy decision before rebounding to a high of 1.1590 driven by the positive US-Iran breakthrough. We expect EUR/USD to edge lower and stabilize closer to 1.1400, reflecting a stronger US growth outlook relative to the Eurozone. ECB rate hikes in a sluggish growth, high inflation environment, is not bullish for EUR but should help cushion the downside”

“As was widely expected, the ECB raised the policy rate 25

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UK GDP Contracted and the Pound is Up?

pril 2026 as a result of the escalating conflict in the Middle East. According to the latest data from the Office for National Statistics (ONS), this marks the first monthly GDP decline since August 2025. Although this contraction aligns with forecasts from economists polled by Reuters, it represents a sharp trend reversal from March, which recorded a 0.3% growth. However, looking at the less volatile three-month perspective, real GDP grew by 0.7% in the period to April 2026, demonstrating that the British economy entered the current crisis on relatively stable foundations.

Chart 1: Real and nominal GDP in the United Kingdom (upper panel) and quarter-on-quarter change (lower panel). In Q1 2026 (January–March), the UK economy grew by 0.6%, offering a solid base by British standards before the effects of the Middle East war materialized. Source: XTB Research based on ONS/Bloomberg data.

How the Iran Conflict Stalled Growth in the United Kingdom

The main catalyst for April’s slowdown is the war between Iran and the US, which recently passed the 100-day mark. The effective blocking of the Strait of Hormuz—a crucial shipping route for oil and many other commodities—paralyzed global supply chains and triggered a sharp surge in energy and fuel prices. As a net energy importer, the UK is exceptionally vulnerable to international energy shocks. A sudden surge in prices at petrol stations forced motorists to drastically cut consumption in April, reversing the positive growth impulses seen at the beginning of the year. Furthermore, ONS surveys revealed widespread complaints from businesses regarding falling turnovers and rising production costs across the wholesale, manufacturing, and transport sectors.

Sector Breakdown: Slump in Services, Stagnation in New Construction

April’s economic slowdown was characterized by uneven performances across core industrial sectors:

  • Services Sector: Recorded a 0.2% decline, becoming the primary driver of the monthly GDP drop. The arts, entertainment, and recreation sector suffered the most, posting a drastic 9.1% fall. This was mainly due to the cancellation of multiple sporting events in the Middle East, which directly hit UK-based companies.
  • Construction: Ticked up marginally by 0.1%. However, this growth came solely from a 0.6% recovery in repair and maintenance. New construction projects fell by 0.3%, complicating the government’s political promises to accelerate housebuilding in the UK.
  • Industrial Production: Showed zero growth (0.0%). Although manufacturing grew by 0.4% (driven by a 4.2% surge in pharmaceutical production), these gains were completely offset by shrinking outputs in the utility sector.

Stagflation Risks and the Bank of England’s Dilemma

The sudden dip in GDP momentum has raised serious concerns about a dangerous descent towards stagflation—a situation where economic stagnation couples with stubborn inflation. The International Monetary Fund (IMF) has already downgraded its 2026 UK economic growth forecast from 1.3% to just 0.8%, warning that Britain could feel the impact of the war most acutely among major economies. Economic conditions could deteriorate further in the third quarter, when the domestic energy price cap is set to rise by 13%, allowing suppliers to pass higher oil and gas costs onto consumers. This leaves the Bank of England in a precarious position ahead of its upcoming interest rate decision. Policymakers must now balance combating war-driven inflation against the risk of triggering a deeper recession.

Following the ONS release, sterling initially lost 0.2% against the dollar as markets scaled back expectations for subsequent rate hikes. Over time, however, a global increase in risk appetite took over in response to easing tensions between the US and Iran, resulting in a weaker dollar. Moreover, the softer GDP does not eliminate the hawkish pressure on the Bank of England, which is widely expected to hold interest rates at 3.75%. Some members of the Monetary Policy Committee may vote for a hike, signaling the central bank’s readiness to combat the prolonged energy shock.

Chart 2: The Bank of England’s main interest rate and UK 2- and 10-year bond yields. Yields are already clearly above the 3.75% rate, signaling hawkish expectations from the debt market, which is organically tightening financial conditions. Source: XTB Research based on Bloomberg data.

Technical Analysis: GBPUSD (D1)

GBPUSD is currently trading slightly up (+0.05%), although the pair on the D1 interval remains in a local downtrend, consolidating around the 1.34158 level. The price is currently moving below key exponential moving averages: EMA 30 (1.34226) and EMA 100 (1.34372), which act as crucial resistance for any building momentum. Following a rebound from recent support near 1.3330, selling pressure has slowed down. The RSI (14) indicator at 49.5 signals complete market neutrality. The next direction depends on a sustained breakout above the moving averages or a return to test the recent lows.

Chart 3: GBPUSD and EURGBP (inverted; blue) exchange rates. Source: xStation5

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Euro steadies against British Pound following UK GDP, German HICP inflation data

  • EUR/GBP remains subdued following the release of data from the UK and Germany.
  • UK GDP contracted by 0.1% month-on-month in April, meeting market forecasts after a 0.3% expansion in March.
  • German May HICP inflation met forecasts, landing at 2.7% year-on-year.

EUR/GBP inches lower after two days of gains, trading around 0.8630 during the Asian hours on Friday. The currency cross remains subdued following the release of economic data from the United Kingdom (UK) and Germany.

The UK Gross Domestic Product (GDP) contracted by 0.1% MoM in April, following a 0.3% rise reported in March. The market forecast was for a 0.1% decline in the same period. Meanwhile, the Index of Services (April) rose 0.8% 3M/3M versus March’s 0.8%. Meanwhile, monthly Industrial Production came in at 0% MoM in April, while Manufacturing Production increased by 0.4% during the same period.

Money markets are currently pricing in at least a 25-basis-point interest rate hike by the Bank of England (BoE) this coming September, with a strong probability of a second increase before the end of the year. This potential tightening comes amid broader economic challenges, as political uncertainty surrounding the leadership of the Labour Party continues to weigh on investor sentiment and compound the current downturn.

Over in the Eurozone, inflation data met forecasts as Germany’s revised Harmonized Index of Consumer Prices (HICP) for May landed at 2.7% year-on-year. On a monthly basis, HICP growth experienced a slight contraction of 0.1%.

The European Central Bank (ECB) took aggressive action on Thursday by raising interest rates for the first time in nearly three years. The central bank also signaled a prolonged hawkish stance, indicating that restrictive monetary policy will likely remain firmly in place through 2027.