Renewed demand for the euro follows signs of easing geopolitical tensions: Iran agreed to a ceasefire deal with Israel, just a day after US airstrikes on critical nuclear sites. With President Trump claiming the destruction of key Iranian nuclear facilities, Tehran is now expected to pivot towards diplomacy in defending its peaceful nuclear ambitions.

Recent eurozone data was mixed: France’s manufacturing PMI dropped to 47.8 (forecast: 50.0), services PMI slipped to 48.7, while Germany posted improvement—manufacturing at 49.0, services at 49.4. The euro area composite services index edged up to 50.0. In the US, S&P Global Services PMI fell to 53.1, and the Manufacturing PMI remained at 52.0.

Germany’s IFO economic expectations index for June beat forecasts at 90.7 (vs. 88.9 prior). Today at 16:00 (GMT+2), markets will focus on Fed Chair Jerome Powell’s Congressional testimony, as he faces growing pressure from the White House to lower rates. Powell has reiterated that any decision will be driven by economic indicators and labor market balance.

GBP/USD

The pound sterling continues its upward trajectory against the US dollar, testing the 1.3565 mark after rebounding from the May 20 local low. The currency is supported by a substantial reduction in Middle East tensions and encouraging UK PMI data: June manufacturing PMI climbed to 47.7 (forecast: 46.6), services PMI rose to 51.3, and the composite index advanced to 50.7.

In contrast, US activity data was less optimistic. S&P Global Services PMI fell to 53.1, while Manufacturing held at 52.0. On the housing front, US existing home sales for May posted a surprise gain (+0.8%) to 4.03 million units.

Both the Fed and Bank of England have left rates unchanged, citing inflation risks. However, the Fed retains more flexibility due to a stronger US economy. Markets will watch Powell’s Congressional testimony and BoE Governor Andrew Bailey’s press conference for further cues.

NZD/USD

The New Zealand dollar is recovering after hitting a multi-week low on May 19, with NZD/USD holding around 0.6031 in Asian trading. US PMI data has tempered dollar strength, while investors eye Powell’s upcoming remarks. With US inflation slowing faster than anticipated, a rate cut could materialize as soon as September.

New Zealand’s key economic data is due Wednesday, with May’s trade surplus expected to narrow from $1.43B to $1.06B. These figures are unlikely to alter the RBNZ’s dovish stance—after six consecutive rate cuts, the benchmark may fall to 2.9% by year-end.

USD/JPY

The US dollar is losing ground versus the yen, trading near 145.25 after retreating from May’s local highs. Market sentiment is buoyed by hopes of a diplomatic breakthrough in the Middle East. US PMIs underwhelmed, while Japanese data from Jibun Bank exceeded expectations: services PMI at 51.5, manufacturing at 50.4.

Focus remains on Powell’s testimony later today for signs of a policy shift.

XAU/USD

Gold is under pressure, testing the 3325.00 support after retreating to a two-week low. The easing of Middle East conflict is a key driver, following US strikes on Iran’s nuclear facilities—most notably, the Fordow enrichment plant and Natanz site. President Trump claimed these actions crippled Iran’s military nuclear capability.

Meanwhile, softer US PMI data has weighed on the dollar. Investors are closely monitoring Powell’s Congressional remarks for hints on the timing of the Fed’s next rate cut cycle, which could begin as early as September.