The USD is higher vs the EURUSD, USDJPY and GBPUSD as the MOU with Iran “is over”
The USD is higher vs the 3 major currency pairs – the EURUSD, USDJPY and GBPUSD. The move to a peace deal with Iran “is over" leading to a flight to safety moves. In the video above, I take a look at the technicals driving the 3 major currency pairs. What is the bias, the risks, the targets right now.
In other news overnight, In Washington, Pres. Trump adopted a much more confrontational stance toward Iran, as the recent ceasefire and diplomatic efforts have unraveled. President Trump said he believes the Iran ceasefire is effectively “over" and suggested the memorandum of understanding (MoU) is no longer viable. He described continued negotiations with Tehran as “a waste of time," although he added that U.S. negotiators could continue talks if they wanted to.
The president’s comments came after a series of escalating events, including Iranian attacks on commercial shipping and U.S. retaliatory strikes on more than 80 Iranian targets. Trump also said he no longer wants to deal with Iran, calling its leaders “a bunch of liars," marking a notable shift away from diplomacy and toward a harder-line approach.
The headlines sparked an immediate risk-off reaction in financial markets. Crude oil prices surged on concerns about potential supply disruptions. U.S. equity futures and government bonds came under pressure.
The U.S. dollar is mostly higher but is lower vs the CAD and AUD as investors sought safety, and currency markets quickly repriced the increased geopolitical risk. The NZD is the exception with a gain on the day after the RBNZ raised rates.
In summary, the Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 2.50%, delivering its first rate hike in three years. Policymakers judged that monetary policy remained accommodative and said additional rate increases are likely, although the timing will depend on incoming inflation and economic data.
The Committee noted that the partial reopening of the Strait of Hormuz has pushed oil prices lower, easing near-term inflation pressures. Headline inflation is expected to have peaked at 3.9% in the June quarter, slowing to 3.3% in the September quarter before returning to the 2% target midpoint by mid-2027.
The RBNZ acknowledged that New Zealand’s economy slowed during the June quarter as the oil shock weighed on activity, but expects growth to rebound in the September quarter as lower fuel prices support household spending. Policymakers also pointed to resilient global growth, helped by AI investment and increased defense spending.
Committee members remained divided on the inflation outlook. Two members saw upside risks from lingering cost pressures and stronger pricing behavior by firms, while four viewed risks as broadly balanced, citing weak consumer demand and uncertainty over the strength of the recovery. A weaker New Zealand dollar was also identified as a potential source of imported inflation.
The statement was interpreted as hawkish by markets, with the explicit guidance that further tightening is likely boosting the New Zealand dollar immediately following the announcement.
Looking at the FX market, the USD changes vs the major currencies shows:
- EUR +0.11%
- JPY +0.24%
- GBP+0.11%
- CHF +0.15%
- CAD -0.09%
- AUD +0.17%
- NZD -0.19%
US stocks futures are implying a lower opening on the war in Iran reigniting.
- Dow Industrial Average down -375 points
- S&P down -46.50 points
- Nasdaq is down -229 points
Looking at the yield curve, yields are moving higher across the curve:
- 2 year yield 4.193%, up 3.1 basis points
- 5 year yield 4.293%, up 3.5 basis points
- 10 year yield 4.559%, +3.1 basis points
- 30 year yield 5.061%, +1.9 basis point
In other markets:
- Crude oil is higher on the war news with the contract up $3.47 at $73.92. The high for the day reached $75.30. The low was at $71.75
- Gold is down $38 or -0.93% at $4062.
- Silver is down $1.17 or -1.97% of $58.80
- Bitcoin is trading lower at $62,227
This article was written by Greg Michalowski at investinglive.com.