US-Iran Deal Hopes Improve Market Sentiment

Reports that the United States and Iran are nearing a peace agreement, with a potential signing this weekend, have significantly improved overall market sentiment and spurred risk-on trading. This optimism has reduced safe-haven demand for the US Dollar, which retraced recent gains, while also impacting other currencies like the Japanese Yen. Key terms of the memorandum of understanding have reportedly been released as officials prepare for a potential deal in Geneva.

Central Banks Signal Divergent Policy Paths

Central banks are signaling varied policy approaches, with the European Central Bank delivering its first rate hike since 2023 and pairing it with a hawkish message from President Lagarde. However, one ECB official noted it was too early to predict the central bank's actions for its July meeting. Meanwhile, the Bank of England is expected to hold interest rates, though analyses indicate a growing minority of policymakers may favor a hike.

Precious Metals React to Geopolitical News

Precious metals prices responded to the shifting market mood, with gold holding onto gains supported by the optimism surrounding a potential US-Iran accord. The resulting weakness in the US Dollar provided a tailwind for the yellow metal. Silver prices fluctuated, initially falling before retracing losses as the broader improvement in risk appetite took hold.

Oil Prices Decline Despite Tightening Physical Market

West Texas Intermediate (WTI) crude oil prices fell for a second consecutive day as progress toward a US-Iran agreement eased concerns about potential supply disruptions in the Strait of Hormuz. This geopolitical de-risking eroded a portion of the recent risk premium in oil prices. The price decline occurred even as physical market data showed a continued drawdown in oil stocks at the key Cushing, Oklahoma, delivery hub, which are approaching operational minimums.