Hawkish Fed and Strong Dollar Pressure Precious Metals

Gold and silver prices faced significant headwinds as the US Dollar climbed to one-year highs against a basket of currencies. This dollar strength was fueled by a hawkish tilt from the Federal Reserve, with markets pricing in the possibility of interest rates remaining higher for longer. Solid US economic data, including an increase in private-sector hiring and better-than-forecast PMI figures, further reinforced expectations of a resilient economy, weighing on non-yielding assets like gold and silver.

Economic Weakness Persists in Europe and the UK

Economic data from Europe and the United Kingdom painted a contrasting picture of weakness, contributing to US Dollar strength. Eurozone business activity remained in contraction territory according to June PMI data, signaling a two-speed recovery and challenging the European Central Bank's case for further tightening. Similarly, the British Pound was pressured by disappointing economic indicators, fiscal concerns, and political uncertainty, with a Bank of England policymaker backing an extended hold on interest rates for the weak economy.

Easing Geopolitical Tensions Send Oil Prices Lower

Oil prices declined as supply-side risks in the Middle East appeared to diminish. The gradual reopening of the Strait of Hormuz and a decision by the United States to grant a 60-day waiver on sanctions, permitting Iranian oil exports, both contributed to the downward pressure on prices. Analysts noted that these developments caused Brent crude to drop back below the $80 per barrel mark.

Divergent Global Central Bank Policies Influence Currencies

Divergent monetary policy outlooks continue to drive major currency pairs, with several central banks diverging from the Fed's hawkish stance. The risk of FX intervention by Japanese authorities increased as the yen fell to a multi-decade low against the dollar. Meanwhile, softer inflation and PMI data in Australia supported expectations for the Reserve Bank of Australia to remain on hold, while the Canadian Dollar weakened amid rising US rate hike bets and falling oil prices.