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Indian Rupee flattens while flaring US-Iran tensions dampen outlook

  • The Indian Rupee trades calmly at open against the US Dollar; however, the outlook has become uncertain.
  • The exchange of attacks between the US and Iran has renewed Middle East tensions.
  • Investors await the US-India CPI data for May.

The Indian Rupee (INR) opens almost flat against the US Dollar (USD) on Wednesday. The USD/INR pair consolidates around 95.42; however, the outlook of the pair has turned bullish as Middle East tensions have flared up again, following the United States (US) retaliation against Iran over the shooting down of an American helicopter.

Renewed US-Iran tensions have offered support to oil prices. As of writing, the MCX Crude Oil contract expiring on June 18 is up 0.8% to near 8,490. Oil prices also clawed back half of their early losses on Tuesday after sliding to 8,212.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.

US strikes after Trump vows retaliation over the shooting down of an Apache helicopter over Hormuz

On late Tuesday, the US Central Command (CENTCOM) announced that it launched a series of attacks on Iran’s air defense, ground control stations, and surveillance radar sites near the Strait of Hormuz, a vital passage to almost 20% of global energy supply. The US was expected to conduct military operations against Iran as President Donald Trump vowed retaliation for shooting down a US Apache helicopter over Hormuz.

In response, Iran has launched missiles on various US airbases in Jordan, Kuwait, and Bahrain, and has warned Washington to leave the Gulf region for their own safety.

“Powerful armed forces will not ignore any attack or threat,” Iran’s Foreign Minister Abbas Araghchi said, adding, “Get out of our region if you want to be safe.”

FIIs remain net sellers on all trading days so far in June

Overseas investors continue to dump their stake in the Indian stock market, as Middle East tensions continue to hurt their sentiment towards risky assets. So far in June, Foreign Institutional Investors (FIIs) have remained net sellers in all trading days of June and have offloaded their stake worth Rs. 60,529.36 crore.

US-India CPI data under spotlight

Later in the day, investors will pay close attention to the US Consumer Price Index (CPI) data for May, which will be published at 12:30 GMT. The US Bureau of Labor Statistics (BLS) is expected to show that the headline CPI grew at an annualized pace of 4.2%, faster than 3.8% in April. In the same period, the core CPI – which excludes volatile food and energy items – is expected to have risen at a faster pace of 2.9% against the previous reading of 2.8%.

Signs of price pressures accelerating further would prompt expectations of the Federal Reserve’s (Fed) interest rate hikes for the year. As of now, the CME FedWatch tool shows that the odds of the Fed delivering at least one interest rate hike this year are almost 72%.

Meanwhile, India’s CPI data on Friday is expected to arrive higher at 4% YoY from 3.48% in April.

Technical Analysis: USD/INR trades in a Symmetrical Triangle formation

USD/INR trades almost flat at around 95.43 at press time. The Symmetrical Triangle formation and pair’s stickiness to the 20-period Exponential Moving Average (EMA) at 95.46, reflects that the immediate trend has turned sideways.

The Relative Strength Index (RSI) wobbles inside the 40.00-60.00 zone, suggesting indecisiveness among investors.

On the topside, immediate resistance is located near the downward-sloping border of the above-mentioned chart pattern at around 96.00. A decisive break above 96.00 would open the door for further upside towards the all-time high at 97.10. On the downside, initial support is seen at the upward support trend-line break level near 95.04, ahead of the structural trend-line origin around 94.49; a sustained drop below these marks would open the way for a deeper corrective phase, while holding above them would keep the broader constructive pattern intact.

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Japanese Yen languishes despite wholesale inflation accelerates in May

  • USD/JPY steadies as the Japanese Yen receives no support after May wholesale inflation rose to a three-year high of 6.3%.
  • Surging factory-gate inflation solidifies market expectations for an imminent hawkish interest rate pivot by the Bank of Japan.
  • The US Dollar may regain ground on safe-haven demand after Iran’s IRGC claimed drone attacks on the US Fifth Fleet.

USD/JPY flatlines after experiencing volatility, trading around 160.40 during the Asian hours on Wednesday. The pair continues to hold its ground, reflecting a struggling Japanese Yen (JPY) that has failed to find support despite a massive acceleration in wholesale inflation. Driven by surging energy costs linked to the ongoing Middle East conflict, Japan’s Producer Price Index (PPI) jumped 6.3% year-over-year in May. This hot printing comfortably outpaced April’s upwardly revised 5.3% figure and surpassed market consensus of 5.5%, marking the fastest pace of wholesale price growth in three years.

This dramatic uptick in Japan’s factory-gate inflation has solidified market expectations for a hawkish pivot from the Bank of Japan (BoJ). With policymakers highly sensitive to the double-whammy of a sharply depreciating JPY and rising import costs, the central bank is widely expected to lift interest rates at its policy meeting next week. Traders are now closely parsing every signal from BoJ Governor Kazuo Ueda, as aggressive market speculation builds for consecutive rate hikes in September and December to rein in stubborn price pressures.

The USD/JPY pair may further appreciate as the safe-haven demand could support the US Dollar (USD), which could be attributed to the renewed Middle East tensions. Iran’s Islamic Revolutionary Guard Corps (IRGC) said it attacked the US Fifth Fleet in Bahrain with drones in response to US strikes on areas in southern Iran. The IRGC warned of “a more severe response” if what it describes as US “aggression” continues.

Earlier, the US launched a third wave of retaliatory strikes on Iranian coastal targets on Wednesday after Iran fired at least three ballistic missiles from Isfahan. This followed an initial round of US strikes on Tuesday, which Washington called a proportional response to Iran downing a US helicopter gunship near the critical Strait of Hormuz.

Stronger-than-expected US May jobs data have boosted expectations of a Federal Reserve (Fed) rate hike this year. Traders will take more cues from the US CPI report later in the day. The headline US CPI is expected to show a rise of 4.2% YoY in May, compared to 3.8% in April. The core CPI is projected to show an increase of 2.9% YoY during the same period, versus 2.8% prior.

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USD/CNH Price Forecast: More downside likely below 6.7500

  • USD/CNH trades marginally lower to near 6.7750 as the US Dollar edges down.
  • China’s CPI remains steady at 1.2% YoY in May, misses 1.3% estimates.
  • Investors await the US inflation data for May.

The USD/CNH pair trades slightly lower to near 6.7750 during the early European trading session on Wednesday. The pair faces selling pressure due to continued outperformance by the Chinese Yuan (CNY), being a trade surplus economy.

On Tuesday, China’s Trade Balance data for May also came in stronger than projected. Trade Balance arrived at $105.43 Billion, higher than the $92.1 Billion estimate and the previous reading of $84.82 Billion. Imports grew strongly by 27.4%, while they were anticipated to rise moderately by 25% vs. the prior release of 25.3%. While Exports rose 19.4% against expectations of 15% and the previous release of 14.1%.

Meanwhile, China’s Consumer Price Index (CPI) data for May has remained steady at an annualized pace of 1.2%, while it was expected to grow at a faster pace of 1.3%.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.12% lower to near 99.87 ahead of the United States (US) CPI data for May, which will be published at 12:30 GMT. The US headline inflation is expected to come in higher at 4.2% Year-on-Year (YoY) from 3.8% in April.

USD/CNH technical analysis

USD/CNH trades lower at around 6.7763, extending the downside bias as spot holds below the 20-day Exponential Moving Average (EMA) at 6.7867. The pair trading below this short-term average suggests sellers retain control, while the 14-day Relative Strength Index (RSI) around 42 stays below the neutral 50 line, hinting at lingering bearish momentum rather than an oversold condition.

On the topside, immediate resistance is now aligned with the 20-day EMA at 6.7867, and a daily close above this barrier would be needed to ease current downside pressure and open the way for a more sustained recovery. On the downside, the pair could slide further towards 6.7500 if it falls below the June 2 low at 6.7580.

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British Pound gains ground to near 1.3400 ahead of US CPI release

  • GBP/USD gains traction to near 1.3390 in Wednesday’s early European session. 
  • Iranian officials warned Gulf states have a “legal and moral responsibility” to prevent US and Israeli strikes. 
  • The US May CPI inflation report will take center stage on Wednesday. 

The GBP/USD pair trades in positive territory around 1.3390 during the early European trading hours on Wednesday. Markets might turn cautious later in the day ahead of the US May Consumer Price Index (CPI) inflation report. On Friday, the monthly UK Gross Domestic Product data will be in the spotlight. 

Financial markets had expected the Bank of England (BoE) to cut interest rates twice this year to 3.25%. Since the US-Iran war began, the situation has reversed, and now a rise of 25 basis points (bpd) before December is projected, according to CNBC.

Nonetheless, the potential upside for the British Pound (GBP) might be limited as renewed tensions in the Middle East weigh on the riskier assets. Iran’s Foreign Minister Abbas Araghchi on Wednesday warned that its neighbors in the Gulf have a “legal and moral responsibility” to prevent American and Israeli strikes. 

This statement came as the US launched retaliatory strikes against Iran on Tuesday in what it called a proportional response to the shooting down of a US helicopter gunship near the Strait of Hormuz a day earlier. 

The US CPI inflation report will be closely watched as it could give some hints about the US interest rate path. If the reports show hotter-than-expected outcomes, this could lead traders to price in a higher probability of the Federal Reserve (Fed) raising interest rates, which would provide some support to the USD against the GBP. 

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Offshore Yuan Remains Firm

The offshore yuan firmed to around 6.77 per dollar on Wednesday as investors assessed the latest inflation data and their implications for China’s economic outlook. Consumer inflation rose 1.2% annually in May 2026, slightly below expectations of 1.3%, indicating that weak household demand continued to offset inflationary pressures from higher global energy prices linked to the Middle East conflict. Meanwhile, producer prices climbed to 3.9% from 2.8% in April and marking the highest reading since July 2022. The increase extended the recovery from China’s long producer-price deflation period, driven largely by higher commodity and energy costs. While China has cushioned part of the energy shock through its strategic oil reserves and renewable energy capacity, persistent cost pressures could squeeze corporate profit margins. A broader pass-through to consumer prices could also erode household consumption, although weak domestic demand has so far limited such spillovers.

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GBP/USD Price Forecast: Overall trend appears sideways amid Triangle formation

  • GBP/USD rises to near 1.3375 as the US Dollar corrects sharply.
  • US President Trump sees a total victory over Iran in the next two weeks.
  • Investors await the US CPI data for May and the UK GDP data for April.

The GBP/USD pair trades 0.26% higher at around 1.3375 during the European trading session on Tuesday. The Cable gains as the US Dollar (USD) declines amid expectations that the United States (US) could reach a deal with Iran soon.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.12%-0.20%-0.03%-0.14%-0.26%-0.54%-0.20%
EUR0.12%-0.06%0.09%-0.02%-0.11%-0.40%-0.06%
GBP0.20%0.06%0.17%0.06%-0.07%-0.32%0.00%
JPY0.03%-0.09%-0.17%-0.11%-0.22%-0.50%-0.16%
CAD0.14%0.02%-0.06%0.11%-0.11%-0.37%-0.05%
AUD0.26%0.11%0.07%0.22%0.11%-0.26%0.06%
NZD0.54%0.40%0.32%0.50%0.37%0.26%0.32%
CHF0.20%0.06%-0.01%0.16%0.05%-0.06%-0.32%

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).

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.17% lower to near 99.83.

On late Monday, US President Donald Trump expressed confidence that a “total victory” on Iran can be announced in two weeks, adding it would lead to a sharp decline in oil prices. The statement from Trump came after Iran agreed to halt attacking the Israeli territory, which led to a sharp decline in oil prices.

The US Dollar has outperformed in the past few months as elevated oil prices due to the energy supply crisis prompted the US inflation and hawkish Federal Reserve (Fed) bets.

The appeal of currencies from economies, such as the United Kingdom (UK), which rely heavily on oil imports to meet their energy needs, improves when oil prices start falling.

Going forward, investors will focus on the US Consumer Price Index (CPI) data for May and the UK Gross Domestic Product (GDP) data for April, which will be released on Wednesday and Friday, respectively.

GBP/USD technical analysis

GBP/USD trades higher at around 1.3375 at the press time. However, the near-term tone remains bearish as it holds below the 20-period Exponential Moving Average (EMA), which is at 1.3428. The pair sits between an upward support trend line break around 1.3312 and the reclaimed downward resistance trend line reference at 1.3593, exhibiting a broader sideways trend. The Relative Strength Index (RSI) near 42 leans soft, hinting that downside pressure persists even if not yet overstretched.

On the topside, initial resistance is located at the 20-EMA around 1.3430, and a sustained break above this barrier would open the way toward the former downtrend resistance line reference near 1.3590. On the downside, immediate support emerges at the prior uptrend support break zone around 1.3301, and a drop below there would expose lower levels. The major support area would be the April 7 low at 1.3217, followed by the March 31 low at 1.3159.

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Australian Dollar picks up amid easing geopolitical tensions, bright data from China

  • AUD/USD hits session highs at 0.7070, although it remains near eight-week lows.
  • Bright Trade Balance data from China has provided a moderate impulse to the Aussie.
  • Markets show some relief as hostilities in the Middle East stop.

The Australian Dollar (AUD) posts moderate gains against the US Dollar (USD) on Tuesday, regaining some of the ground lost last week, although it remains at its lowest level in nearly two months. News that Israel and Iran halted hostilities has triggered a mild relief rally. At the same time, upbeat Chinese trade data has provided additional support for the Aussie, as China is Australia’s major trading partner.

Data released by the Chinese Government earlier on Tuesday showed that the Asian giant’s trade surplus rose to USD 105.43 billion in May, its highest level since January and well beyond market expectations of USD 92.1 billion. In April, China’s trade surplus amounted to USD 84.82 billion.

China’s exports bloom with the AI rush

In May, exports showed a 19.4% year-over-year (y-o-y) growth, following a 14.1% increase in April, also beating expectations of a 15% increment. Strong demand for chips, amid the sharp increase in AI investment, has been the main driver for May’s surplus, offsetting the negative impact of the energy shock on global demand.

Imports also accelerated, with a 27.4% year-on-year increase in May after 25.3% year-on-year growth in April, suggesting that domestic demand is picking up pace after months of sluggish consumer spending.

Meanwhile, news reporting a pause in the hostilities between Israel and Iran has triggered a moderate pullback in Oil prices, providing a mild risk-appetite. US President Donald Trump affirmed earlier on Tuesday that he might have a proposal for a peace agreement with Iran and showed optimism about an upcoming deal.

In the US, the strong macroeconomic figures released last week, namely Friday’s Nonfarm Payrolls report, have boosted expectations that the Fed will be able to hike interest rates in the second half of the year, if inflationary pressures remain high. In that sense, the US Consumer Price Index (CPI) release, due on Wednesday, will be key to confirm the market’s expectations and is likely to set the US Dollar’s near-term direction.

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Why is the British Pound struggling when the BoE is considering rate hikes?

The British Pound (GBP) is struggling as mounting political uncertainty and deteriorating economic indicators complicate the United Kingdom’s outlook. Ahead of the key Gross Domestic Product (GDP) April data to be released on Friday, financial markets are balancing the risk of an economic contraction against the probability of further interest rate hikes by the Bank of England (BoE) to rein in energy-driven inflation. 

With internal political friction intensifying due to a high-stakes leadership challenge within the ruling Labour Party, major financial institutions are turning increasingly cautious on the Pound’s near-term trajectory.

GBP/USD daily chart. Source: FXStreet.

Sluggish economic growth and fiscal concerns threaten to drag Pound lower

Macro strategists at Brown Brothers Harriman (BBH) warn that the combination of a potentially contracting UK economy and stagflationary pressures leaves the British Pound deeply exposed to a downward correction against the US Dollar. They emphasize that while anticipated central bank interventions may try to curb price pressures, structural damage to the UK’s fiscal credibility from potential political reshuffling could rapidly worsen a currency undershoot.

We expect GBP/USD to fall to 1.3100, reflecting a stronger US growth outlook relative to the UK. BOE rate hikes in a sluggish growth, high inflation environment, is not bullish for GBP but should help cushion the downside.

Uncertainty over the next BoE moves

Economists at Societe Generale suggest that any near-term political noise surrounding Manchester Mayor Andy Burnham’s bid for the Labour leadership will likely yield limited radical change. On the monetary front, they acknowledge that while hawkish voices within the BoE’s Monetary Policy Committee (MPC) are pushing hard for an immediate rate increase, the broader consensus will likely favor a more conservative wait-and-see strategy.

We expect these members [those opting for a rate hike] to remain in the minority and for the BoE to keep rates on hold in June.

Banks anticipate a downward-biased trajectory for the British Pound

The banks anticipate a soft trend for the British Pound. Brown Brothers Harriman maintains an explicitly bearish outlook, forecasting a drop to the 1.3100 mark for the GBP/USD