Weekly Analysis by zForex Research Team

[Z Forex]

Peace Deal De-Escalates Energy Risk (15 - 19 June, 2026)​

Global markets experienced a strong wave of risk-on sentiment this week following reports of an interim agreement between the US and Iran to halt their military conflict and reopen the Strait of Hormuz, where nearly 600 vessels are currently stranded. The peace deal, scheduled to be signed in Switzerland on Friday, establishes a 60-day window for talks regarding Iran’s nuclear program, offering immediate maritime ceasefire terms and partial sanctions relief on Iranian overseas oil sales.

The de-escalation pushed Brent crude down sharply to $83.50/bbl, reducing energy-driven inflation fears worldwide. In tandem, US macroeconomic sentiment improved noticeably as consumer confidence bounced back, allowing sovereign bond yields to recede from recent highs and giving precious metals room to recover.

Market Drivers & Catalysts​

• The Swiss Interim Accord: The upcoming Friday signing provides a 60-day diplomatic runway. While broader financial incentives remain unclear, the immediate reopening of the Strait of Hormuz is dismantling the war's acute supply premium.
• Easing US Inflation Expectations: The University of Michigan Consumer Sentiment Index jumped to 48.9 in June (vs 46.0 expected). Crucially, 1-year inflation expectations dropped to 4.6%, while the 5-year outlook fell to 3.4%.
• Unblocking Global Supply: With near 600 ships waiting to exit the Persian Gulf, oil prices dipped significantly, though they remain roughly $13 above pre-war benchmarks as inventories await rebuilding.
• The Warsh Era Begins: Markets are braced for the first Federal Reserve policy meeting under newly appointed Chair Kevin Warsh. While rates are expected to hold steady, traders are looking for any hawkish signs of a late-2026 hike.
• BOJ's Critical Threshold: Japan's 10-year bond yield hit 2.56% during the week as markets fully price in a 25 basis point rate hike at the upcoming meeting, which would lift the policy rate to 1.00%, its highest since 1995.

Fixed Income​

• US 2-Year Treasury Yield: Settled under 4.03%, dropping roughly 5 basis points on Monday alone as fading oil risks drove buyers back into short-duration paper, bringing the key 4.00% psychological level into view.
• US 10-Year Treasury Yield: Slipped below 4.43%, losing 5 basis points over the week. Softening energy benchmarks directly lowered the market's long-term inflation projections and aggressive Fed tightening bets.
• Japan 2-Year JGB Yield: Fell 1.5 basis points to slide below 1.40%. The reduction in crude prices temporarily softened near-term domestic inflation pressure ahead of the central bank's rate decision.
• Japan 10-Year JGB Yield: Shook off an intraday drop to 2.56% to stabilize near 2.58%. The market remains firmly positioned for a monetary tightening cycle to help defend the yen.

Commodities​

Gold staged a notable recovery following last week's aggressive liquidation. Lower oil prices helped cool global rate-hike anxieties, pushing the metal toward its primary technical barrier: the 200-day moving average near $4,450/oz.

Silver and other hard assets rallied alongside gold. The stabilization of energy inputs renewed investor interest in non-yielding tangible assets under a less aggressive global central bank outlook.

Currencies​

• U.S. Dollar Index (DXY): Weakened across the board. The reduction in geopolitical hostilities dented safe-haven demand for the dollar, shifting capital toward pro-growth currencies.
• Euro: Rebounded back above the key 1.1575–1.1600 technical resistance zone to trade near 1.1620 during early European trading hours, indicating renewed upside momentum.
• Australian Dollar: Climbed past 0.7085, engineering a full recovery from the previous Friday's depressed close below the 0.7050 mark, fueled by surging global risk appetite.
• Japanese Yen: Briefly strengthened below 160.00 per dollar before hovering just above that boundary. Traders are reluctant to chase the currency too far ahead of the historic BOJ meeting.

Economic Data Highlights​

• US Consumer Sentiment (June): Printed at 48.9, a clear improvement from May’s 44.8 reading, signaling that households are responding positively to the cooling energy crisis.
• US 1-Year Inflation Expectations: Declined to 4.6%, easing immediate pressure on the Federal Reserve to signal additional interest rate hikes this summer.
• US 5-Year Inflation Expectations: Dropped to 3.4%, demonstrating that long-run consumer price expectations are beginning to re-anchor as shipping corridors reopen.
• BOJ Policy Rate Target: Priced heavily for a move to 1.00% from the current 0.75%, a level unseen for over three decades, to curb imported energy distortions.

Macro Calendar Highlights​

• Federal Reserve Policy Meeting & Press Conference (Chair Kevin Warsh)
• Bank of Japan (BOJ) Interest Rate Decision
• Bank of England (BoE) Monetary Policy Announcement & UK CPI
• China Monthly Macro Portfolio (Industrial Production, Retail Sales, Investment)
• US Retail Sales, Industrial Production, and Housing Starts (May)

 

[Z Forex]

Fed and Iran Uncertainty Keep Markets on Edge (22-26 June)​

Global financial markets faced a turbulent cross-current this week as sharp shifts in the US–Iran diplomatic track collided with hawkish monetary policy signals.

The temporary optimism from the prior week dissolved as scheduled peace talks were abruptly canceled, sparking fresh uncertainty over a durable Middle East ceasefire. Donald Trump issued warnings of potential military strikes if Hezbollah attacks persist, while also cautioning Iran regarding the Strait of Hormuz.

Despite reports of suspended talks, conflicting signals emerged as mediators from Qatar and Pakistan indicated both sides had agreed on a 60-day roadmap toward a final deal. In the macro sphere, the Federal Reserve’s hawkish pause under new Chair Kevin Warsh dominated sentiment. Policymakers sharply raised inflation estimates due to ongoing Middle East tensions, driving the US Dollar Index to its highest level since May 2025 and cementing a broad sell-off across precious metals and regional currencies.

Market Drivers & Catalysts​

• Diplomatic Whiplash: Sentiment fractured after formal US–Iran peace talks were canceled, though separate updates from Qatari and Pakistani mediators suggested that a 60-day roadmap remained on the table.
• The Warsh Fed’s Hawkish Stance: The Federal Reserve held the funds rate at 3.50%–3.75%, but policymakers aggressively raised inflation forecasts, with nearly half of the officials now anticipating a rate hike in 2026.
• Yen Beyond Historic Lows: The Japanese yen collapsed past 161 per dollar, completely erasing all gains from the April 30 support action. Widening policy divergence remains a structural drag despite the BOJ’s historic tightening.
• European Yield Pressures: German Bund yields moved higher as ECB officials adopted an aggressive tone. Joachim Wunsch hinted at another interest rate hike, while Philip Lane asserted that the Eurozone economy can absorb higher borrowing costs.
• China's Industrial Rebound: May macro data revealed that China's industrial production accelerated to 4.5% year-on-year, beating the 4.3% forecast, led by sustained expansion across the automotive, electronics, and machinery sectors.

Fixed Income​

• US 10-Year Treasury Note Yield: Slipped slightly to 4.44% as markets calibrated the latest economic projections. Fixed income markets are now heavily pricing an interest rate hike for October, while the shorter-term 2-year yield edged up to 4.20% before a Friday holiday closure.
• UK 10-Year Bond Yield: Rebounded to around 4.8%. The upward move reflected political uncertainty following Andy Burnham’s by-election victory, fueling market speculation regarding a leadership challenge to Prime Minister Keir Starmer.
• Japan 10-Year Government Bond Yield: Climbed to 2.64%. Yields trended upward after Deputy Governor Ryozo Himino pointed to robust corporate earnings and rising incomes supporting steady tightening.
• Germany 10-Year Bund Yield: Rose to 2.95%. Sovereign debt faced selling pressure as regional energy markets steadied and policymakers signaled readiness for further monetary tightening.

Commodities​

Gold plunged below $4,150/oz. The precious metal extended its downward trajectory, heavily pressured by the prospect of higher interest rates and elevated consumer price expectations.

Silver declined toward $64/oz during Monday's trading session. Industrial and investor demand was stifled by tighter monetary expectations and renewed tensions surrounding the initial stages of the US–Iran negotiations.

Currencies​

• U.S. Dollar Index (DXY): Rose to approximately 101. The US Dollar capitalized on its safe-haven appeal and the updated Fed dot plot, which revealed deeply divided views regarding the necessity of a 2026 rate hike.
• Euro: Slumped to near $1.145, recording a weekly loss of roughly 1%. The single currency hit its lowest level since mid-March as the broader dollar rally overmatched hawkish baseline statements from the ECB.
• British Pound: Retreated to settle just above $1.32, suffering a weekly drop exceeding 1%. Strong UK retail data failed to insulate sterling against political uncertainty and a broader migration away from risk assets.
• Japanese Yen: Weakened beyond 161 per dollar to approach its lowest levels since 1986. Fresh warnings from Japanese officials regarding potential direct market intervention failed to halt the decline.

Economic Data Highlights​

• US Interest Rate Decision: Held at 3.50%–3.75% for a fourth consecutive meeting. Growth forecasts were trimmed, while inflation projections were adjusted upward due to persistent geopolitical friction.
• Bank of Japan Policy Rate: Raised by 25 basis points to 1.0% in an 8–1 vote, marking the highest level for the benchmark rate since 1995 as the central bank moves defensively against energy-driven risks.
• China Industrial Production: Expanded 4.5% YoY in May (up from 4.1% in April). Total industrial output for the first five months of 2026 grew at a 5.4% pace, accompanied by a 0.4% month-over-month gain.
• Japan Inflation Rate (May): Rose to 1.5% annually, up from 1.4% in April, as energy subsidy expirations took effect. Food inflation moderated to an 18-month low of 3.5%, while core inflation held steady at 1.4%.

Macro Calendar Highlights​

• US Core PCE Inflation Report (May)
• Eurozone Flash Consumer Price Index Estimate
• China Official Manufacturing and Services PMI
• Japan Retail Sales and Tokyo CPI Preview
• Developments on the 60-Day Qatar-Pakistan Diplomatic Roadmap

 

[Z Forex]

Fed Hike Bets Rise Ahead of Jobs Data (29 June – 3 July)​

Global markets entered the week with investors focused on the upcoming US labor market report, which is expected to provide the next major signal for Federal Reserve policy. The US dollar remained near its highest level in more than a year after last week’s strong rally, supported by hawkish comments from Fed Chair Kevin Warsh and growing expectations of further monetary tightening.

At the same time, renewed military clashes between the United States and Iran in the Strait of Hormuz briefly reignited inflation concerns before both sides agreed to suspend military action ahead of another round of peace talks in Doha.

The macro backdrop remains driven by the balance between resilient economic activity and persistent inflation risks. Traders now expect three Federal Reserve rate hikes this year, with the probability of the first increase in September exceeding 60%. While the ECB recently delivered a 25 basis point rate hike and the Bank of Japan continues to signal further policy normalization, geopolitical developments and energy prices remain key variables for inflation expectations across global markets.

Market Drivers & Catalysts​

• Fed Rate Expectations: Hawkish comments from Fed Chair Kevin Warsh reinforced expectations for tighter monetary policy. Markets now anticipate three Federal Reserve rate hikes this year, with the probability of the first move in September exceeding 60%.
• US Jobs Report in Focus: Investors are waiting for this week’s employment data to assess the strength of the labor market and the Fed’s next policy steps.
• Middle East Developments: Fresh clashes between the US and Iran around the Strait of Hormuz temporarily lifted oil prices before both countries agreed to halt military operations ahead of peace negotiations in Doha.
• Inflation Concerns Persist: Higher oil prices continue to support inflation risks despite improving diplomatic prospects.
• Global Central Banks: The ECB raised interest rates by 25 basis points this month, while the Bank of Japan continues to signal additional tightening following stronger domestic economic data.

Fixed Income​

• US 10-Year Treasury Note Yield: Held near 4.38% after last week’s decline as investors awaited the June employment report. Treasury markets remain focused on labor market conditions and their implications for future Federal Reserve policy.
• UK 10-Year Bond Yield: Rose to 4.7379%, gaining 3 basis points on the day. The yield remains 11.8 basis points below last month’s level but stands 22.6 basis points higher than a year ago, reflecting the sharp increase since March 2026.
• Japan 10-Year Government Bond Yield: Increased to approximately 2.65%, ending a three-session losing streak. Strong May retail sales, which rose 5.3% year-on-year and marked the fastest growth since November 2023, reinforced expectations for further Bank of Japan tightening.
• Germany 10-Year Bund Yield: While no major move was reported this week, markets continue to monitor the ECB’s tightening cycle following this month’s 25 basis point rate increase and guidance that inflation remains on track to return to target over the medium term.

Commodities​

Gold slipped to around $4,050 per ounce, ending a two-session rally as renewed fighting between the United States and Iran pushed oil prices higher and revived inflation concerns. Iran struck a container vessel, a ship carrying Qatari oil, and military facilities in Kuwait and Bahrain before both sides agreed to suspend military operations ahead of peace negotiations scheduled for this week in Doha.

Silver declined to approximately $58.5 per ounce, ending a two-session recovery. Renewed hostilities in the Strait of Hormuz pushed oil prices higher, increasing inflation concerns and weighing on precious metals.

Currencies​

• U.S. Dollar Index (DXY): Traded near 101.3 after last week’s rally to its highest level in more than a year. Investors remain focused on this week’s US employment report, while markets increasingly expect three Federal Reserve rate hikes this year.
• Euro: Slipped below $1.14, trading near its weakest level since June 2025. A stronger US dollar continued to pressure the single currency despite the ECB’s recent 25-basis-point rate increase. President Christine Lagarde maintained that inflation remains on track to return to target and rejected the need for more aggressive tightening.
• British Pound: Rose marginally to 1.3203 on June 29, gaining 0.04% on the day. However, sterling remains down 1.87% over the past month and 3.85% over the past year. For historical comparison, the pound reached an all-time high of 2.86 in December 1957.
• Japanese Yen: Held near 161.7 per dollar, remaining close to levels last seen in 1986. Despite strong domestic data, including May retail sales growth of 5.3%, the fastest pace since November 2023, the currency remained under pressure from dollar strength. Markets continue to expect further Bank of Japan rate hikes.

Economic Calendar Highlights​

• UK Q1 GDP (QoQ and YoY)
• US Chicago PMI
• JOLTS Job Openings
• CB Consumer Confidence
• Eurozone Preliminary CPI
• US ADP Nonfarm Employment Change
• S&P Global Manufacturing PMI
• ISM Manufacturing PMI
• ISM Manufacturing Prices
• Crude Oil Inventories
• US Nonfarm Payrolls
• Unemployment Rate
• Average Hourly Earnings
• Initial Jobless Claims
• US Independence Day (July 3)

 

[Z Forex]

Weak Jobs Lift Rate Cut Hopes (6 – 10 July)​

Global markets ended the week with improving risk sentiment after weaker US employment data reduced expectations for further Federal Reserve rate hikes. The US dollar posted its steepest weekly decline since April as June payrolls missed forecasts by a wide margin, while falling oil prices and the normalization of shipping through the Strait of Hormuz eased inflation concerns.

Investors also continued to monitor central bank guidance, with policymakers balancing slowing inflation against resilient economic activity.

The macro backdrop shifted in favor of lower interest rate expectations following signs of cooling in the US labor market. June payrolls increased by just 57,000, well below the expected 110,000, while private payroll weakness and downward revisions to previous months reinforced expectations that the Federal Reserve will remain patient. At the same time, easing energy prices following the US-Iran peace agreement reduced inflation pressures globally, prompting markets to reassess the outlook for monetary policy in both the United States and Europe.

Market Drivers & Catalysts​

• Weak US Employment Data: June nonfarm payrolls increased by only 57,000, well below the 110,000 forecast, while April and May payrolls were revised lower by a combined 74,000 jobs.
• Fed Expectations Shift: Weak labor market data reduced expectations for another Fed rate hike. September rate hike odds fell to around 50% from 64% to 66%, while Chair Kevin Warsh reiterated the Fed’s commitment to its 2% inflation target despite easing price pressures.
• US-Iran Peace Agreement: The reopening of the Strait of Hormuz and improving stability in the Middle East eased concerns over energy supplies and helped reduce global inflation expectations.
• Oil Supply Increases: Seven OPEC+ members, led by Saudi Arabia and Russia, approved an output increase of 188,000 barrels per day, while Saudi exports and UAE shipments returned close to pre-conflict levels.
• Central Bank Outlook: Softer Eurozone inflation and dovish comments from ECB President Christine Lagarde reduced expectations for a third ECB rate hike, although markets continue to expect a second increase later this year.

Fixed Income​

• US 10-Year Treasury Note Yield: Fell 2 basis points to 4.46% as weaker labor market data reduced expectations for additional Federal Reserve tightening. June payrolls disappointed, unemployment fell to 4.2% due to lower labor force participation, and September rate hike expectations dropped to around 50%.
• UK 10-Year Bond Yield: Remained just below 4.8%. Although weaker US jobs data and the Bank of England’s cautious stance reduced rate hike expectations, gilt yields still increased 6 basis points over the week as investors adjusted positions and tracked higher Japanese government bond yields.
• Japan 10-Year Government Bond Yield: Climbed toward 2.8%, approaching its highest level since October 1996. Weak demand at a government bond auction and concerns over increased fiscal spending, including plans for more than ¥370 trillion ($2.29 trillion) in strategic investment through fiscal 2040, pushed yields higher.
• Germany 10-Year Bund Yield: Rose to 2.93%, gaining nearly 9 basis points during the week and recording its first weekly increase since early June. Rising Japanese yields supported the move, although softer Eurozone inflation and falling crude prices continued to limit upside.

Commodities​

Gold climbed to $4,170 per ounce, its highest level since June 23, gaining around 2% for the week after four consecutive weekly declines. The weaker US dollar, reduced Fed rate hike expectations, and continued central bank purchases, totaling 41 tonnes in May, supported prices. Demand softened in India, while Chinese buying improved.

Silver remained above $62 per ounce, extending last week’s gains as weaker US employment data and lower oil prices reduced expectations for additional Federal Reserve tightening. Falling energy prices also eased inflation concerns, supporting precious metals.

Currencies​

• U.S. Dollar Index (DXY): Remained below 101, extending losses after June payrolls rose just 57,000, far below expectations of 110,000. The weaker labor report reduced expectations for further Fed tightening and ended the dollar’s two-week rally.
• Euro: Finished the week above $1.14, gaining around 0.5% as weaker US data pressured the dollar. However, gains were limited after Eurozone inflation slowed to 2.8%, core inflation eased to 2.4%, and ECB President Christine Lagarde adopted a more cautious tone on future rate increases.
• British Pound: Held near $1.335, its highest level in two weeks, rising around 1% over the week. Sterling benefited from dollar weakness, although gains were limited by Governor Andrew Bailey’s cautious outlook for the UK economy and inflation.
• Japanese Yen: Strengthened beyond 161 per dollar after Finance Minister Satsuki Katayama repeated that authorities remain ready to intervene if necessary. Weak US jobs data and lower Fed rate hike expectations added further support, while markets noted Japan may no longer provide advance warnings before intervention.

Economic Data Highlights​

• US Nonfarm Payrolls (June): Employment increased by 57,000, well below expectations of 110,000 and lower than May’s revised 129,000. Professional and business services added 36,000 jobs, social assistance gained 25,000, and health care increased by 22,000, while leisure and hospitality lost 61,000 jobs. Payrolls for April and May were revised lower by a combined 74,000.
• US Unemployment Rate (June): Fell to 4.2% from 4.3%, although the improvement reflected a shrinking labor force. Employment declined by 507,000, the labor force fell by 720,000 to 169.36 million, and the participation rate dropped to 61.5%, the lowest since March 2021. The broader U-6 unemployment rate eased to 7.9% from 8.1%.
• Eurozone Inflation (June): Annual inflation slowed to 2.8% from 3.2%, below the 3.0% forecast and the lowest level since February. Core inflation eased to 2.4% from 2.6%, while energy inflation slowed to 8.7% from 10.8%. Germany, France, and Italy all recorded slower inflation, while Spain remained unchanged at 3.6%.
• Japan Consumer Confidence (June): Increased to 33.8 from 33.6, marking the highest reading since February, although slightly below the 34.0 forecast. Improvements were recorded in overall livelihood, employment prospects, and willingness to purchase durable goods, while income growth expectations remained unchanged at 40.3.

Macro Calendar Highlights​

• Eurozone Retail Sales
• US ISM Services PMI
• FOMC Minutes
• US Existing Home Sales