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British Pound advances as US Dollar remains subdued following inflation data

  • GBP/USD rises as the US Dollar sustains losses from soft inflation data, raising expectations for a less hawkish Fed.
  • US June CPI inflation slowed to 3.5% year-over-year from May’s 4.2%, comfortably beating the market consensus of 3.8%.
  • The British Pound gains as energy-driven inflation worries push investors to price in aggressive BoE rate hikes.

GBP/USD rises for the second consecutive day, trading around 1.3400 during the Asian hours on Wednesday. The pair appreciates as the US Dollar (USD) holds losses following softer-than-expected US inflation data, fueling hopes that the US Federal Reserve (Fed) might adopt a less hawkish monetary stance.

The US Consumer Price Index (CPI) inflation eased to 3.5% year-over-year in June, dropping from a three-year high of 4.2% in May and coming in well below the market consensus of 3.8%. On a monthly basis, headline CPI actually declined by 0.4% in June, a notable shift from the 0.5% increase recorded in May.

However, the downside of the Greenback could be restrained amid rising safe-haven demand following renewed tensions between the United States (US) and Iran. The renewed Hormuz tensions drive up oil prices, fueling inflation concerns and prolonging higher interest rates by the Federal Reserve (Fed). The CME FedWatch Tool indicates that markets are now pricing in a roughly 50% chance of a Federal Reserve rate hike in September.

The British Pound (GBP) strengthens as Middle East tensions fuel inflation worries from rising energy prices, prompting investors to price in aggressive Bank of England (BoE) rate hikes. Markets now heavily anticipate two increases in 2026, with a September hike fully priced in.

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Offshore Yuan Hits 1-Month High

The offshore yuan strengthened to around 6.76 per dollar on Wednesday, extending gains from the previous session to its strongest level in a month, supported by a weaker US dollar even as China’s economic data pointed to uneven growth. The greenback remained under pressure after softer-than-expected US inflation data reduced expectations for a near-term Federal Reserve rate hike, with traders now pricing in a pause at the July meeting despite ongoing oil-driven inflation risks. Meanwhile, China’s economy expanded 4.3% year-on-year in Q2, marking the weakest growth since Q4 2022 and falling below Beijing’s 2026 target range of 4.5%–5.0%. Fixed-asset investment declined 5.7% in the first half, worse than both market expectations and the January–May decline. However, signs of resilience emerged as industrial production accelerated to a three-month high of 5.3% in June, retail sales rebounded 1%, and the urban unemployment rate eased to a one-year low of 5.0%.

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AUD/USD Price Tests nine-day EMA barrier near 0.6950

  • AUD/USD may decline toward a nearly six-month low of 0.6833.
  • The 14-day Relative Strength Index around 40 signals the asset remains under bearish pressure.
  • The pair is testing the immediate barrier at the nine-day EMA of 0.6932.

AUD/USD edges higher after posting 0.5% losses in the previous day, trading around 0.6930 during the Asian hours on Tuesday. The technical analysis of the daily chart shows the pair remaining within the descending channel pattern, suggesting a prevailing bearish bias.

The AUD/USD pair is holding a bearish near-term bias as it remains under both the nine-day and 50-day Exponential Moving Averages (EMAs). The pair is attempting to stabilise after recent losses, but the 14-day Relative Strength Index (RSI) around 40 suggests only modest recovery momentum, hinting that any rebound may stay capped while price trades below these clustered moving-average barriers.

The AUD/USD pair may fall toward a nearly six-month low of 0.6833, recorded on March 30. Further declines would expose the lower boundary of the descending channel around 0.6770.

On the upside, the AUD/USD is testing the immediate barrier at the nine-day EMA of 0.6932, followed by the upper boundary of the descending channel around 0.6960. A break above the channel would cause a bullish emergence and support the pair to test the 50-day EMA of 0.7011.

Chart Analysis AUD/USD
AUD/USD: Daily Chart

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.11%-0.10%-0.13%-0.18%-0.17%-0.75%-0.16%
EUR0.11%0.00%0.00%-0.07%-0.07%-0.63%-0.05%
GBP0.10%-0.00%0.00%-0.06%-0.05%-0.64%-0.05%
JPY0.13%0.00%0.00%-0.06%-0.07%-0.65%-0.07%
CAD0.18%0.07%0.06%0.06%-0.01%-0.57%0.01%
AUD0.17%0.07%0.05%0.07%0.00%-0.57%0.03%
NZD0.75%0.63%0.64%0.65%0.57%0.57%0.59%
CHF0.16%0.05%0.05%0.07%-0.01%-0.03%-0.59%

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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

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Offshore Yuan Holds Decline

The offshore yuan held its decline around 6.78 per dollar on Tuesday as investors balanced expectations of slower economic growth against stronger-than-expected trade data. China’s economy is projected to expand 4.5% year-on-year in Q2 on Wednesday, down from 5% in Q1 and near the lower end of Beijing’s 2026 growth target of 4.5%–5%, amid weak consumer spending, a prolonged property downturn, and subdued private investment. Meanwhile, June trade data pointed to solid external demand. Exports surged 27% year-on-year to a record USD 412.4 billion, while imports jumped 36% to an all-time high of USD 286.8 billion, both exceeding forecasts. As a result, the trade surplus widened to USD 125.6 billion. Strong global demand for AI-related hardware and higher semiconductor prices continued to support Asia’s trade flows, helping cushion the impact of domestic economic weakness. Investors are now awaiting this month’s Politburo meeting for clues on potential policy measures to bolster growth.

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Kiwi Dollar Rises to 4-Week High

The New Zealand dollar rose to around $0.577 on Tuesday, its highest level in four weeks, following remarks from RBNZ Chief Economist Paul Conway. Conway warned that inflation may not ease as quickly as the central bank expects, raising the possibility of further interest rate hikes. Last week, the RBNZ lowered its forecast for third-quarter inflation to 3.3% from 4.3%, citing lower fuel prices following the interim US-Iran agreement. However, oil prices have rebounded in recent days as renewed fighting in the Middle East fueled supply concerns. The RBNZ’s hawkish stance last week, combined with a series of upbeat domestic economic data, has led markets to price in two additional rate hikes this year. However, the kiwi’s gains were limited as the standoff between the US and Iran intensified, with President Trump reimposing a US naval blockade of Iranian ports and announcing a 20% charge on all cargo shipped through the Strait of Hormuz, dampening risk appetite.

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Canadian Dollar gains on higher oil prices

  • USD/CAD slips as the commodity-linked Canadian Dollar gains on higher oil prices.
  • Crude oil prices gain as Trump reinstated an Iranian blockade and imposed a 20% transit fee on other vessels securing the strait.
  • The US Dollar could receive support as intensifying Middle East tensions could drive global investors into safe-haven assets.

USD/CAD continues its losing streak after remaining flat in the previous day, trading around 1.4150 during the Asian hours on Tuesday. The pair depreciates as the commodity-linked Canadian Dollar (CAD) receives support from higher oil prices. It is important to note that Canada is the largest crude exporter to the United States (US).

Crude oil prices rise due to mounting supply anxieties following a sharp escalation of geopolitical hostilities in the Middle East. US President Donald Trump has reinstated a naval blockade targeting Iranian vessels and customers transiting the Strait of Hormuz, while simultaneously announcing that all other commercial cargo passing through the strategic waterway will be subject to a 20% reimbursement fee.

President Trump asserted that the US must be financially compensated for its military efforts to secure the volatile chokepoint, pointing directly to regional nations that benefit from US protection, including Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, and Kuwait.

The USD/CAD pair’s downside remains limited as a wave of geopolitical tensions in the Middle East fuels safe-haven demand, which could drive investors back into the US Dollar (USD). At the same time, climbing crude oil prices are complicating the outlook; while higher oil typically boosts the commodity-linked Canadian Dollar (CAD), it is also triggering renewed fears that energy-driven inflation will force the Federal Reserve (Fed) to tighten policy further. Market expectations have shifted rapidly in response, with the CME FedWatch Tool now showing a 51% probability of a Fed rate hike in September, compared to just a 23% chance that rates will stay on hold.

Market participants are temporarily pausing ahead of two massive macroeconomic catalysts scheduled for Tuesday. First up is the US June Consumer Price Index (CPI) report, where analysts anticipate a divergence between a 0.1% month-on-month decline in headline inflation and a sticky 0.3% increase in the core reading. Shortly after, Federal Reserve Chair Kevin Warsh will deliver highly anticipated congressional testimony, a session that traders will dissect word-by-word for hints on whether the central bank will validate the market’s growing hawkishness.

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Euro posts modest gains above 1.1350 as traders await US CPI inflation release

  • EUR/USD trades with mild gains around 1.1385 in Tuesday’s early Asian session. 
  • Trump said that the US will blockade Iran in the Strait of Hormuz and charge ships 20% for safe passage. 
  • Traders brace for the US CPI data later on Tuesday.

The EUR/USD pair posts modest gains near 1.1385 during the Asian trading hours on Tuesday. Nonetheless, the potential upside for the major pair might be limited amid renewed US military strikes against Iran. Traders will take more cues from the US June Consumer Price Index (CPI) inflation data, which will be released later on Tuesday. 

US President Donald Trump on Monday announced that the US is reinstating its blockade of Iranian maritime traffic and would impose a toll of 20% on all cargo being shipped through the Strait of Hormuz. 

The US military has resumed strikes on Iran, including on the port city of Bandar Abbas and on the Qeshm and Kish islands. In response, Iran has struck two UAE tankers, the Mombasa and Al Bahiyah. Rising tensions in the Middle East could boost a safe-haven currency such as the Greenback and create a headwind for the major pair in the near term. 

The US CPI inflation report will be published on Tuesday, which could offer some hints about the US Federal Reserve’s (Fed) next move. A softer inflation outcome would delay the case for the US interest rate hikes and undermine the US Dollar (USD) against the Euro (EUR). 

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Japanese Yen consolidates as USD bulls look to US CPI and Fed’s Warsh

  • USD/JPY stalls the previous day’s strong move up, though the downside seems cushioned.
  • Economic risks from the Mideast crisis and the wide US-Japan rate gap undermine the JPY.
  • Safe-haven buying and Fed hike bets favor USD bulls ahead of the US CPI and Fed’s Warsh.

The USD/JPY pair is seen consolidating the previous day’s strong move up and trading just below mid-162.00s during the Asian session on Tuesday. Spot prices, however, remain close to a four-decade top touched earlier this month, keeping traders on edge amid expectations of a possible intervention by Japanese authorities.

In the meantime, Japan’s Finance Minister, Satsuki Katayama, said that a change to the Government Pension Investment Fund (GPIF) asset allocation could be examined if the investment environment shifts sharply. This, in turn, lends support to the Japanese Yen (JPY). The US Dollar (USD), on the other hand, pauses after a two-day rally as bulls opt to wait for the release of the latest US consumer inflation figures and US Federal Reserve (Fed) Chair Kevin Warsh’s congressional testimony. This further contributes to capping the upside for the USD/JPY pair.

Meanwhile, a further escalation of tensions between the US and Iran, along with hawkish Fed expectations, might continue to act as a tailwind for the safe-haven Greenback. In the latest developments surrounding the Middle East crisis, US President Donald Trump on Monday reimposed a blockade of Iranian ports, and the US military launched a third straight night of strikes against Iran. In response, Iran’s Islamic Revolutionary Guard Corps (IRGC) targeted US facilities in the region, while two UAE tankers were hit by Iranian cruise missiles in the Strait of Hormuz.

This adds to economic concerns amid Japan’s heavy reliance on imported oil from the Middle East and continues to undermine the JPY. Furthermore, a fresh leg up in Crude Oil prices reignites inflation fears and bolsters bets that the US central bank will raise borrowing costs by the end of this year. This could further widen the US-Japan rate gap, despite the recent Bank of Japan (BoJ) rate hike to 1%, or the highest since 1995, and keep the so-called Yen carry trade active. The fundamental backdrop keeps the USD/JPY pair close to a four-decade high and favors bulls.