A collection of positive and negative news that affects the foreign exchange market

1. Geopolitics and market sentiment

The conflict in the Middle East escalates: The military confrontation between Israel and Iran continues to ferment, resulting in a sharp rise in crude oil prices, and Brent crude oil futures rose by more than 2%. Intensified geopolitical risks have boosted market demand for hedging, but traditional safe-haven currencies such as the Japanese yen and the Swiss franc have performed weakly, while oil-related currencies such as the Norwegian krone and the Canadian dollar have strengthened due to rising oil prices. Analysis points out that the current market response to geopolitical risks is characterized by "oil-driven" characteristics, and inflation concerns caused by rising oil prices may affect the Fed's policy path.

U.S. tariff policy uncertainty: The long-term impact of the Trump administration's tariff policy remains questionable, and the Federal Reserve clearly mentioned in its June interest rate meeting that tariffs may push up inflation. Although the outlook for tariff negotiations has eased recently, market concerns about the global trade landscape are still on the rise, which may exacerbate the volatility of the dollar.

2. Central Bank Policy and Interest Rate Resolution

The Federal Reserve maintained interest rates unchanged: The Federal Reserve's June meeting decided to maintain the benchmark interest rate of 4.25%-4.5%, and at the same time raised the 2025 inflation forecast to 3%, and implyed that interest rate cuts may be cut twice this year, totaling 50 basis points. The dot chart shows that the Fed's internal differences on interest rate paths have increased, with 7 officials supporting the maintenance of interest rates unchanged, and 8 supporting a 50 basis point interest rate cut. Policy uncertainty supports the short-term strengthening of the US dollar.

ECB policy shift: ECB lowered major refinancing rates by 25 basis points to 2.15% in June, and suggested further interest rate cuts in the future to cope with weak economic conditions. The initial value of the manufacturing PMI in the euro zone fell to 45.6 in June, hitting a six-month low, and the service PMI was also lower than expected. The weak economic data strengthened the market's forecast for the ECB's easing policy.In the future, the euro is negative.

Bank of England dovish signal: The Bank of England keeps interest rates unchanged at 4.25%, but a 6-3 dovish voting disagreement suggests a rate cut as early as August. Although the UK's CPI in May was still as high as 3.4% year-on-year, market concerns about weak economic growth overshadowed inflationary pressure, and the pound was under pressure against the US dollar.

Swiss National Bank cut interest rates: The Swiss National Bank lowered its current deposit rate by 25 basis points to 0%, and suggested further easing in the future, causing the Swiss franc to fall against the euro and the dollar.

3. Economic data and market expectations

U.S. economic data differentiation: The US ISM service industry index unexpectedly fell to 48.8 (expected 52.6), indicating that the service industry contracted; but the www.avaforexcn.comprehensive PMI final value is 54.8 and the service industry final value is 55.3, indicating that the economy is still resilient. Data contradictions have led to intensifying short-term volatility in the US dollar, and the market needs to pay attention to subsequent non-agricultural employment data to confirm economic trends.

Eurozone economy is weak: the initial value of manufacturing PMI in the euro zone in June is 45.6 (expected 47.9), a six-month low; the initial value of PMI in the service industry is 52.6 (expected 53.4), and the weak economic recovery has exacerbated the downward pressure on the euro. Germany's manufacturing PMI fell to 43.3, and France's www.avaforexcn.comprehensive PMI approached the boom-bust line, highlighting the dilemma of core economies in the euro zone.

The inflation pressure in the UK remains: the UK's CPI in May was 3.4% year-on-year, although it slowed down from the previous value, but it was still far higher than the central bank's target of 2%. The market has differences on the Bank of England's interest rate cut expectations, and the pound exchange rate fluctuations have intensified.

Asian economic data: South Korea's May PPI monthly rate was -0.1% (expected -0.4%), indicating that the deflationary pressure was eased, which was good for the Korean won; China's five-year LPR in June remained unchanged at 3.5%, in line with market expectations, and the RMB exchange rate remained stable.

4. www.avaforexcn.commodity and exchange rate linkage

Crude oil prices rise: The escalation of conflict in the Middle East has driven Brent crude oil futures to rise by more than 2%. The market expects that if Iran's oil exports are halved, oil prices may rise to US$85 per barrel. Rising oil prices are beneficial to currencies of oil exporters such as the Norwegian krone and the Canadian dollar, while boosting global inflation expectations, which may delay the pace of the Federal Reserve's interest rate cut.

Gold under pressure: www.avaforexcn.comEX gold futures fell 0.61% to $3387.4 per ounce. The strengthening of the US dollar and the rebound in market risk appetite suppressed gold safe-haven demand.

5. Technical and market expectations

Dollar Index: The US dollar index is supported by safe-haven demand, but the technical side shows that if it cannot break through the 50-day moving average resistance level of 99.60, it may restart the downward trend.

Euro/USD: Euro/USD fluctuates around 1.15, the 4-hour chart shows that the Bollinger band contracts, and the market is full of wait-and-see sentiment. If the euro zone economic data continues to be weak, it may fall below the 1.14 support level.

British Pound vs. USD:British Pound vs. USD fluctuates around 1.34. Technical indicators show that long and short forces are balanced. Pay attention to the UKThe central bank's policy signals and economic data are to break through the range.

6. Important events and data predictions

Economic data: US retail sales data in June, number of initial unemployment claims; industrial output data in the euro zone in May.

Bank policy: Speech by ECB officials; minutes of the Bank of England monetary policy meeting.

Geopolitics: Progress in the Middle East; U.S. tariff policy trends.

7. www.avaforexcn.comprehensive analysis

Favoritative factors:

The Middle East conflict pushes up oil-related currencies (Norwegian kroner, Canadian dollar).

The US economic data partially exceeded expectations, supporting the short-term strengthening of the US dollar.

China's foreign exchange market is operating smoothly, with net inflow of cross-border funds.

Bold factors:

The euro zone economy is weak, the ECB policy turns to loose, and the euro is negative.

Bank of England dovish signals suppress the pound.

Inflation burden caused by geopolitical riskswww.avaforexcn.comWW>Which may delay the Fed's interest rate cut.

Operational suggestions:

USD: Pay attention to the breakout of the 99.60 resistance level, and if it cannot break through, it may pull back.

Euro: Short selling at highs, target 1.14.

GBP: Mainly wait and see, waiting for the Bank of England policy guidance.

Petroleum currency: Long Norwegian kroner and Canadian dollar on dips.

Hell-haven currencies: The Japanese Yen and Swiss franc are limited to geopolitical risks, so be cautious in the short term.

The above content is all about "【Aihua Official Website】: Collection of Positive and Negative News that Influences the Foreign Exchange Market". It was carefully www.avaforexcn.compiled and edited by Aihua Avatrade Forex editor. I hope it will be helpful to your trading! Thanks for the support!

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