The US dollar continued to gain ground against the euro, pound, and yen on the forex market as investor sentiment was shaped by fresh Federal Reserve commentary and geopolitical developments. The most recent statements from Fed Chair Jerome Powell, delivered before Congress, underscored expectations for a summer uptick in inflation and the need for a patient approach to monetary easing. While Powell indicated that a return to dovish policy could occur if June and July CPI readings show little movement, he made clear that the central bank requires more certainty on the effects of tariffs and price pressures before acting.

Kansas City Fed President Jeff Schmid also supported a “wait and see” stance, highlighting the need to assess the broader impact of higher import tariffs on growth. Meanwhile, Fed Vice Chair Michael Barr signaled he expects inflation to accelerate in the near term. These cautious statements contrasted with earlier remarks from FOMC members such as Michelle Bowman and Chicago Fed President Austan Goolsbee, who had left the door open to rate cuts in the coming months. Most analysts now anticipate two policy moves: one in September, another before year-end.

Forex, Eurozone: EUR Rebounds Versus Yen, Softens Against USD and GBP

The euro’s moves remain heavily influenced by external dynamics. ECB Chief Economist Philip Lane acknowledged significant progress in fighting inflation, though service-sector prices remain elevated, up 3.2% year-on-year in May. A Reuters poll of leading economists points to another 25 basis point rate cut in September, with some experts projecting a second reduction before year-end.

UK: Pound Gains on EUR and JPY, Slips Versus USD

The pound advanced against the euro and yen but lost ground to the dollar. Bank of England Deputy Governor Dave Ramsden reported clear signs of labor market cooling and suggested inflation could fall below current projections. Governor Andrew Bailey indicated that BoE reserves are likely to reach neutral levels next year, as the UK moves from a period of quantitative easing to demand-driven liquidity management, with current reserves at approximately £550 billion.

Japan: Yen Weakens Across the Board as Policy Divergence Widens

The yen slipped against the dollar, euro, and pound following mixed signals from Bank of Japan policymakers. Fresh data showed corporate inflation falling from 3.4% to 3.3% (versus an expected 3.1%), still above the BoJ’s 2% target. The central bank’s latest minutes reveal a lack of consensus, with some members calling for steady rates due to tariff uncertainties, while others favor further tightening as consumer prices run above forecast.

Australia: AUD Gains Versus Euro, Yen, and Pound, Mixed vs USD

The Australian dollar outperformed the euro, yen, and pound in forex trading but showed mixed dynamics against the greenback. Investors reacted to May inflation data: headline CPI slowed to 2.1% (from 2.4%, below the forecast of 2.3%), hovering near the lower end of the Reserve Bank of Australia’s 2.0–3.0% target range. The trimmed mean fell to 2.4%—the lowest since 2021. Market consensus now firmly expects the RBA to cut rates by 25 basis points at its next meeting in July.

Oil: Range-Bound as Geopolitical Risk Fades and Inventory Data Looms

Oil prices remained confined within a narrow range, reflecting offsetting market drivers. The recently announced ceasefire between Iran and Israel sharply reduced the geopolitical risk premium and the threat of supply disruptions from the Middle East. However, steeper price declines were prevented by bullish inventory data: the latest American Petroleum Institute report showed a 4.277-million-barrel drop in US crude stockpiles. Later today, traders await the EIA’s weekly petroleum status report (16:30 GMT+2), with expectations of a 1.2-million-barrel draw, which could trigger a short-term rebound in oil prices.