Geopolitical De-escalation Weighs on Oil Prices

Reports of progress toward an interim peace deal between the U.S. and Iran are easing geopolitical tensions, with discussions reportedly entering a "second stage." This has raised expectations for the reopening of the Strait of Hormuz, contributing to a drop in WTI crude oil prices to three-month lows. While the de-escalation may temper some inflationary pressures, some corporate executives anticipate a delayed inflationary impact from the crisis.

Divergent Central Bank Policies Influence Currencies

Global currency markets are being driven by varying central bank actions, with investor focus shifting toward the U.S. Federal Reserve. In Australia, the RBA held its key rate at 4.35%, and despite a hawkish statement noting persistent inflation, the Australian Dollar's rally stalled. Similarly, the Bank of Japan's widely anticipated interest rate hike to 1.00% failed to provide significant support for the Yen, as markets perceived the overall policy stance as still accommodative.

Gold Supported by Official Sector Buying

Gold prices have seen a recovery, influenced by the easing of oil-led inflation fears and a potential peak in hawkish repricing for the Federal Reserve, while silver prices also posted gains. Underscoring strong underlying support for bullion, a World Gold Council survey revealed that a record 45% of global central banks expect to increase their gold reserves in the short term. This robust official sector demand is anticipated to continue despite gold's significant price appreciation over the last two years.

EU-US Trade Deal and Positive German Data Support Euro

European Union lawmakers approved a trade deal with the United States, clearing the way for cuts to U.S. import duties and averting a potential trade conflict. In other regional news, economic sentiment in Germany improved significantly, with the ZEW survey turning positive in June for the first time since the previous year. These positive developments provided a boost to the Euro, which gained against the U.S. Dollar.