Markets traded cautiously on Wednesday as investors juggled hawkish Fed signals with growing Middle East tensions.
Equities ended flat, gold sold off, oil dipped, and the U.S. dollar rebounded late in the session after Fed Chair Powell warned of persistent inflation pressures.
Here are headlines you may have missed in the last trading sessions!
Headlines:
- Australia Westpac leading index for May: -0.1% m/m (0.2% m/m forecast; 0.0% m/m previous)
- U.K. retail price index for May: 4.3% y/y (4.7% y/y forecast; 4.5% y/y previous); 0.2% m/m (0.6% m/m forecast; 1.7% m/m previous)
- U.K. CPI for May: 0.2% m/m (0.3% m/m forecast; 1.2% m/m previous); 3.4% y/y (3.5% y/y forecast; 3.5% y/y previous); Core CPI at 3.5% y/y (3.8% y/y forecast; 3.8% y/y previous); 0.2% m/m (0.4% m/m forecast; 1.4% m/m previous)
- Iran’s Ayatollah Ali Khamenei warned the U.S. it would suffer “irreparable damage” if it engages in military action against Iran
- Euro Area current account for April: 19.3B (59.5B forecast; 60.1B previous)
- Euro Area final CPI for May: 1.9% y/y (1.9% y/y forecast; 2.2% y/y previous); Core CPI at 2.3% y/y (2.3% y/y forecast; 2.7% y/y previous)
- U.S. housing starts for May: -9.8% m/m (-0.8% m/m forecast; 1.6% m/m previous); 1.26M (1.35M forecast; 1.36M previous)
- U.S. building permits for May: 1.39M (1.4M forecast; 1.42M previous); -2.0% m/m (-1.5% m/m forecast; -4.0% m/m previous)
- U.S. initial jobless claims for June 14: 245.0k (255.0k forecast; 248.0k previous)
- U.S. EIA crude oil stocks change for June 13: -11.47M (-3.64M previous)
- FOMC Kept Rates On Hold As Expected, USD Higher After Powell’s Presser
- U.S. President Trump thinks the Fed’s rates should be 2.5 points lower
- U.S. President Trump floated Iran outreach to U.S. amid tensions, but Tehran firmly rejected the narrative
- U.S. President Trump told Israel’s Netanyahu to ‘keep going’ with airstrikes, said he’s given Iran ‘ultimate ultimatum’
Broad Market Price Action:
Markets traded with nervous caution, caught between the Fed’s less dovish tone and lingering Middle East jitters. European stocks opened with a bit of green, but lost steam as the day wore on, while S&P 500 futures popped early only to fizzle out. The index closed basically flat, down just one point. It was the kind of day when nobody really wanted to stick their neck out.
Gold experienced a pronounced retreat, falling to $3,365 as the precious metal muted its safe-haven appeal following the FOMC decision. The selloff intensified after Fed Chair Powell highlighted their hawkish goods inflation expectations.
Oil prices edged lower, with WTI slipping to $73.00. Even with tensions simmering near the Strait of Hormuz, traders seemed tired of paying the geopolitical premium without confirmation of U.S. participation in the Israel-Iran conflict. Treasury yields barely budged, holding steady around 4.39% despite Powell’s firmer tone.
Bitcoin hovered just below $105,000, staying mostly in its lane. But the crypto crowd found a silver lining after the Senate passed the GENIUS Act. The bipartisan legislation, which could legitimize the $256 billion stablecoin market, provided crucial support for crypto sentiment even as broader markets struggled with uncertainty.
FX Market Behavior: U.S. Dollar vs. Majors:
The U.S. dollar saw a choppy session on Wednesday as markets balanced geopolitical risks with hawkish Fed signals. The Greenback started the day on the back foot in Asia after Trump’s call for Iran’s “unconditional surrender” raised fears of direct U.S. involvement in the Israel-Iran conflict. Risk and U.S. dollar appetite soured, dragging USD lower against the majors.
Price action remained subdued in Europe despite key inflation prints. UK CPI matched expectations at 3.4% year over year, while the Euro Area’s final CPI came in at 1.9%. These figures offered little direction, and the dollar held slightly weaker amid cautious trading. While Trump’s tone appeared to shift toward domestic (read: flagpole) issues, Iran’s Supreme Leader issued a warning of retaliation, keeping headline risks elevated.
A turning point came during the U.S. session after the FOMC’s decision to hold rates steady. Fed Chair Powell’s press conference took center stage, as he warned of “meaningful inflation” and pointed to stubborn goods price pressures. That sparked broad-based dollar buying, overriding soft U.S. housing starts data that fell short of expectations.
By the close, the Greenback had recovered earlier losses and ended mixed, with inflation concerns once again dominating the market narrative.
Upcoming Potential Catalysts on the Economic Calendar
- Swiss balance of trade for May at 6:00 am GMT
- Swiss SNB interest rate decision for June at 7:30 am GMT
- Euro area ECB President Lagarde speech at 7:30 am GMT
- Euro area construction output for April at 9:00 am GMT
- Euro area ECB Guindos speech at 9:45 am GMT
- Euro area ECB President Lagarde speech at 10:30 am GMT
- Canada CFIB business barometer for June at 11:00 am GMT
- U.K. official bank rate for June 19 at 11:00 am GMT
- U.K. MPC meeting minutes at 11:00 am GMT
- U.K. GfK consumer confidence for June at 11:01 pm GMT
- U.S. Juneteenth National Independence Day
- Japan consumer price index growth rate for May at 11:30 pm GMT
- Japan BoJ monetary policy meeting minutes at 11:50 pm GMT
Traders are in for a loaded European session with the SNB and BOE both announcing rate decisions, plus a flurry of ECB speeches that could spark serious volatility in EUR and GBP pairs.
News updates don’t slow down in the U.S. session either, with Canadian business sentiment data on deck and the yen potentially getting jolted by late-night Japanese inflation and BOJ minutes.
And then there are potential updates on the U.S. participation in the Israel-Iran war, which could cause volatility spikes among the majors. Don’t even think of missing these potential market movers!
As always, stay nimble and don’t forget to check out our Forex Correlation Calculator when taking any trades!
