Central Banks Signal Hawkish Stance Amid Uncertainty

Federal Reserve officials expressed growing uncertainty about the path of monetary policy, with some questioning the central bank's easing bias and suggesting the next rate move could be a hike or a cut. This hawkish shift was echoed by policymakers at the Bank of England and the European Central Bank, who cited inflationary pressures from geopolitical conflicts and persistent energy price risks as reasons for a more cautious or aggressive stance.

Geopolitical Tensions Escalate and Impact Markets

Geopolitical tensions increased as the US warned shippers against paying potential Iranian tolls in the Strait of Hormuz, while reports also indicated Iran sent a new diplomatic proposal to the US. These developments in the Middle East contributed to a rebound in gold prices and weighed on the US Dollar, while trade frictions were separately heightened by the US raising tariffs on European Union cars.

Japanese Intervention Shakes Currency Markets

The Japanese Yen rebounded sharply after authorities were reported to have intervened in foreign exchange markets for a second day to counter the currency's slide past the 160 per dollar level. This action created significant volatility and led to a broad-based weakening of the US Dollar, which in turn pushed currencies like the British Pound and the Euro to multi-week highs against the greenback.