The dollar came under additional pressure after Fed Chair Jerome Powell's testimony to Congress, where he once again refused to provide a timeline for rate cuts — drawing criticism from the White House. Powell stressed that rate reductions are “appropriate later this year,” but was non-committal on tariff policy, only noting that deteriorating trade conditions could fuel inflation risk. Meanwhile, euro bulls drew support from robust German IFO business climate data: June readings climbed from 87.5 to 88.4 (forecast: 88.3), expectations jumped to 90.7 (vs. 90.0 est.), and the current assessment edged up to 86.2 (vs. 86.5 forecast). The upbeat German momentum is fueled by ECB rate cuts and large-scale infrastructure modernization plans. However, uncertainty over US tariff policy persists, as a moratorium on higher duties expires in July.
GBP/USD: Sterling Pauses After Rally, Awaiting New Market Drivers
The British pound trades flat near $1.3620 in quiet conditions, with traders on the sidelines awaiting fresh catalysts. The previous two sessions saw solid gains for GBP/USD, as Middle East de-escalation pressured the dollar and lifted risk appetite. Attention remains on the fallout from Powell’s Congressional appearance, where he reiterated that rate cuts may be appropriate “later this year.” Powell highlighted continued labor market strength and controlled inflation as reasons for the Fed’s patience. Recent US housing price data showed a 0.4% monthly decline in April (vs. 0.1% est.) and an annual slowdown to 3.4% from 4.1%. The Richmond Fed manufacturing index rose to -7 in June from -9. Traders are also watching for Thursday’s speech from Bank of England Governor Andrew Bailey. Notably, both the BoE and Fed left policy rates unchanged this month, citing ongoing inflation concerns and a reluctance to move ahead of each other.
AUD/USD: Aussie Advances on Ceasefire News, But RBA Easing Risks Linger
The Australian dollar is climbing in early Asian trade, with AUD/USD breaking towards $0.6500 amid broad-based dollar softness and improving risk sentiment after the US brokered a peace deal between Israel and Iran. However, scattered reports of truce violations remain. Last week’s US airstrikes on Iranian nuclear targets prompted retaliatory actions by Tehran against US military bases in Qatar and Iraq. Dollar momentum faded further after Powell declined to specify a rate-cut timetable, facing renewed political criticism. Meanwhile, Australian inflation data revealed a sharper-than-expected slowdown in CPI to 2.1% year-on-year (forecast: 2.3%), down from 2.4%, which could nudge the Reserve Bank of Australia towards policy easing — a potential medium-term headwind for AUD if rate differentials with the Fed widen.
USD/JPY: Yen Consolidates as Investors Weigh Fed and BOJ Divergence
The USD/JPY pair is trading mixed near 145.10, consolidating after a two-day pullback from this week’s highs on ceasefire headlines out of the Middle East. Market focus is split between Fed and Bank of Japan policy. While the Fed signals a late-year rate cut, the BOJ is edging closer to fresh tightening in response to rising inflation risk. The market expects a 25-basis-point hike from the BOJ, while the Fed is not projected to pivot dovish until September. In his Congressional appearance, Powell suggested that softening labor data and lower inflation could bring forward policy action. Separately, Japanese Economy Minister Ryosei Akazawa visits the US on June 26 for key trade talks — investors are hopeful for a deal before the July 9 tariff deadline to avoid a spike in auto export duties. Latest Japanese leading indicator data showed a rise to 104.2 in April from 103.4, and the coincident index climbed to 116.0.
XAU/USD: Gold Retreats as Ceasefire Dims Safe-Haven Demand
Gold is consolidating around $3,330 per ounce after a pullback from last week’s highs near $3,450. Previously, safe-haven demand for gold was supported by escalation fears between Israel and Iran, but risk appetite has improved with the ceasefire, brokered directly by the US. Markets are also digesting Powell’s Congressional comments on policy easing “later this year,” highlighting a robust labor market and manageable inflation that allow the Fed to remain data-dependent. US housing price data disappointed, dropping 0.4% in April, and the Richmond Fed manufacturing index improved modestly to -7. As the crisis subsides, focus may shift away from gold and back to broader macro drivers.