Sterling may find renewed upside in the near-term as Middle East de-escalation, lower oil prices, and shifting monetary policy expectations on both sides of the Atlantic combine to support the pound against the dollar. The recent signing of the U.S.-Iran memorandum of understanding has catalysed a meaningful decline in oil prices, providing broad relief to risk sentiment and potentially alleviating persistent inflationary pressures in the UK and globally. Should the drop in oil accelerate the disinflationary trend, the Bank of England's current hawkish stance — with one rate hike priced in by the October MPC meeting — is likely to soften.

A pivot toward a more dovish BoE policy path would support GBP/USD by relieving fiscal pressures that resulted from the recent surge in UK gilt yields, which heightened market sensitivity to Britain's funding dynamics.

A more accommodative BoE outlook could additionally ease domestic political tensions, as improved UK growth prospects may strengthen Prime Minister Keir Starmer's position within the Labour Party.

On the U.S. side, lower oil and reduced inflation expectations may afford Fed Chair Kevin Warsh room to deliver the rate cuts President Donald Trump has been pressing for, which would likely weigh on the dollar and provide an additional tailwind to sterling.

For now, GBP/USD traders appear comfortable operating within the 1.33–1.35 range, with moves driven largely by U.S.-Iran headlines. Key risks remain, however. The smoldering Hezbollah-Israel conflict could derail fragile U.S.-Iran peace and reignite hostilities, while any delay in lowering UK inflation lower could revive fiscal and political concerns, potentially capping sterling gains above the 1.35 trend-high.
Sterling Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Morgan Stanley Research previews the June FOMC meeting on Wednesday.

"We expect the Fed to hold rates unchanged in June, with no dissents. In the statement, we expect new recognition of faster payroll gains. We also expect the FOMC to drop the easing bias, instead saying something like "in considering any adjustments to the target range..." In the SEP, we expect the median dot to show no cuts this year, one cut in 2027, and one cut in 2028. First press conferences can be uneven. There's a greater chance of miscommunication and subsequent correction, in our view," MS notes.

"We expect Warsh to describe an uncertain economic outlook, to point out that heightened uncertainty argues for patience in policymaking, and to say that the FOMC believes the current stance of policy is appropriate. How much guidance he is willing to give is an important question, as he has leaned against guidance in commentary in the past," MS adds.

Goldman Sachs Research previews tomorrow's June FOMC meeting.

"The FOMC is widely expected to drop its forward guidance suggesting cuts at its June meeting. We expect the FOMC to remove the phrase “the extent and timing of additional” in reference to adjustments to the funds rate, though it could also simplify its statement further. We expect the median dot to show no change to the funds rate in 2026, with three participants showing a hike, followed by one cut in 2027 and one more in 2028.  We assume that Warsh will not submit dots," GS notes.

"In the 2026 economic projections, we expect lower GDP growth (-0.2pp to 2.2%) and unemployment (-0.1pp to 4.3%) and higher headline (+1.2pp to 3.9%) and core inflation (+0.6pp to 3.3%).  We expect the 2027 inflation projection to rise 0.1pp to 2.3%, implying little effect of the oil shock beyond this year. We continue to see rate hikes as unlikely but do not expect further cuts until well into 2027," GS adds,

• AUD/USD fell below the 10-DMA, hit 0.7043 overnight on broad-based USD buying

• USD selling then emerged, US yields softened & USD/CNH turned lower

• AUD/USD buying took hold, the pair hit 0.7078, it traded up +0.09% in early NY

• Gains in equities , gold , silver helped underpin AUD/USD gains

• Daily techs lean bullish; RSI turned upward & a daily bull hammer candle formed

• Monthly techs still lean bearish however; above 0.7205/10 may negate bearish signals
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• EUR/USD peaked 1.1622 Monday after US/Iran deal news and trades 1.1609-1.1575 Tuesday (EBS), market await Fed for clues

• More large 1.1600 FX option strikes help to contain price action before their 10-am New York cut expiry Tues, larger on Thursday

• Bulls may be encouraged by daily close above 21-dma at 1.1605 and 55-dma 1.1662, but above 200-dma 1.1672 remains key

• Daily cloud adds resistance 1.1629-1.1701 as do a massive $9-billion 1.1640-55 option strikes which expire on Thursday

• FX option implied volatility sits at at 2026 lows - that's consistent with low realised volatility/expectations

• Risk reversals are stepping back from last week's highs, reflecting diminishing demand for EUR/USD downside hedges
EUR/USD daily chart (EBS)


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• GBP remains range-bound with FX option implied volatility at its lowest since January — 1-month 6.0, 3-month 6.2, 1-year 7.2.

• The US/Iran deal has provided modest relief but little GBP direction — hence further FX vol compression

• Risk reversals still favour downside strikes but that skew is retreating from mid-May highs, nearing its lowest since February

• However, short-date option implied volatility is supported to recognise near-term event risks - Makerfield by-election, US Fed and UK MPC

• Andy Burnham is expected to win Makerfield and launch Labour leadership challenge, although timeline unclear - uncertainty may cap GBP

• The Fed is arguably the biggest risk to FX and GBP/USD this week as markets scrutinise new Gov Kevin Warsh's stance on economic policy

• Related comment - The FX winners from a US/Iran peace deal
GBP/USD FXO implied volatility


GBP/USD risk reversals


(Richard Pace is a Reuters market analyst. The views expressed are his own)

June 16 (Reuters) - If Andy Burnham's bid to become Britain's next prime minister is successful, gilts and the pound will be primed to react to his choice of finance minister.

Shabana Mahmood and Ed Miliband are reportedly in the frame for the second most important job in the British government, if Burnham succeeds Keir Starmer and opts to replace Rachel Reeves.

Gilt yields might rise, to the detriment of sterling, if Miliband - who is on the 'soft left' of the Labour Party - enters 11 Downing Street. In contrast, gilt yields could fall, and the pound strengthen, if Burnham decides to either keep Reeves in her job or pick centrist Mahmood to replace her. Burnham's bid to become leader is dependent upon him winning the Makerfield by-election Thursday - which he is favoured to do, helped by feuding between Reform UK and Restore Britain. The Financial Times, meanwhile, reports that "Burnham plans to give Starmer 'space' to resign after by-election, allies say."

Related:
GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• AUD/USD gravitates towards option expiries after dip to 0.70425 on RBA rate hold

• The largest expiries for today's NY cut are 0.7060-65 strikes

• 0.70745 was Asian session high, before RBA monetary policy announcement

• RBA warns rate hikes might not be over after keeping its cash rate at 4.35%

• First two-day FOMC meeting chaired by Warsh gets underway later

• Australia declares El Nino in Pacific that could become strongest in decades

AUDUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• AUD/USD leans over a potentially crucial chart ledge, last 0.7052

• Tues close below 0.7050 engages Bollinger downtrend channel

• Would confirm 100 DMA resistance 0.7085 as a strong chart top

• Would also mark bearish deflection from Ichimoku cloud resistance

• Those technical cues will inspire fresh AUD sellers toward 0.7000

• RBA's Bullock hawkish despite first hold this year
AUD


(Ewen Chew is a Reuters market analyst. The views expressed are his own.)

• AUD/USD -0.3% Tue after RBA leaves the OCR unchanged at 4.35% as expected

• RBA's decision to hold unanimous, will hike rates again if required

• AUD remains capped near 0.7089, downside extension likely

• CN May retail sales -0.6% (poll 0.0%), urban investment -4.1% (poll -2.0%)

• New Fed Chair Warsh speaking post FOMC outcome Wed, will be closely watched

• Trump says Iran peace deal already signed; Israel states not bound by terms

• Range Asia 0.70495-745, support 0.6834, resistance 0.7089 0.7200 0.7283
AUD Daily 55-DMA


AUD Hourly Bollinger Study

(James Connell is a Reuters market analyst. The views expressed are his own.)

• USD/CNY stays up after opening slightly higher, last 6.7605

• Bollinger downtrend channel affirmed on close below 6.7650

• Buoyant USD/JPY after as-expected BOJ hike supports USD/AXJ

• China econ data underscores dismal domestic demand

• Further aid needed to revive consumption while rate cut seems less likely

• Stats bureau says need to boost employment, incomes
CNY


(Ewen Chew is a Reuters market analyst. The views expressed are his own.)

ING Research adopts a mildly bearish bias on EUR/USD over the coming month.

"It looks like FX markets are entering a period where the dollar will be back in demand. Our house call is that energy prices will remain high or rise further into July as inventory drawdown strategies are questioned. This inflation shock will be with us for longer. With a stable labour market, the Federal Reserve will have to delay its easing cycle deep into 2027. Bearish flattening of the yield curve means cyclical dollar strength should be with us through the summer," ING notes.

"Having already hiked to 2.25%, we expect another hike from the European Central Bank either in July or September. But the stagflationary shock will be felt more in the eurozone than in the US. EUR/USD could be pushed to 1.13/14 in July – but this is not 2022," ING adds.

• Shares of Australia's PC Gold rise as much as 6.8% to A$1.235, their highest since June 9

• Mineral explorer says it entered into a conditional share purchase agreement to acquire Terracore Gold, securing gold exploration east of the Spring Hill Gold Project

• PC Gold says drilling at Spring Hill Gold Project in Northern Territory continues to deliver strong results from Macau Link Zone and Macau Footwall Zone

• PC2 up 249.3% YTD

(Reporting by Keshav Singh Chundawat in Bengaluru)

• Australian gold stocks rise as much as 1.5% to hit their highest level since June 3

• Sub-index rises for a third straight session

• Bullion prices rose overnight after Iran and the U.S. agreed terms to end their war, easing expectations of higher interest rates [GOL/]

• Northern Star Resources climbs 2.3%, while Dateline Resources jumps 19.2%

• Sub-index down ~11% YTD

(Reporting by Anjali Singh in Bengaluru)

• USD/JPY holding relatively bid again on 160, Asia so far today 160.24-37 EBS

• Seems expected BOJ hike today fully discounted, being shrugged off by market

• EconMin Kiuchi to attend today's meeting, likely pressure Policy Board

• Well known government wants BOJ to be maybe less hawkish than it already is

• Could affect the breadth of the hike and communication on July-September

• Market at large seems more interested on what the Warsh Fed will do tomorrow

• This especially barring surprises from the BOJ, at the Uchida presser after

• With the yen not strengthening at all, FX intervention watch on, post-BOJ?

• Unless there is some sort of action, 161 could be in spec sights

• Massive option expiries tipped at 162.00 and especially 165.00 bull targets

• Massive expiries today to downside - 157.00 $2.2 bln, 157.30-85 $1.2 bln

• 158.00 $2.3 bln too, less above, on 159 $1.3 bln, 160.50-161.00 $858 mln

• JGB-US Treasury rate diffs mixed, in 2s @263, narrower, 10s @185 bps, wider

• Some demand eyed at Tokyo fix as usual but likely quiet later into BOJ

• Related comments , , ,

• And , , , also

• US markets , , ,

• On BOJ/EconMin Kiuchi ,

• On US-Iran , ,

• On US economy , , for more click on [FXBUZ]

USD/JPY:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• NZD/USD -0.7% from Mon 0.5865 high in wake of initial U.S.-Iran peace deal

• Trump claims deal already signed; Israel says not bound by the agreement

• DJIA closes at record high with Brent crude trading at 3-month lows

• NZD attempt to break above 0.5865 55-DMA fails on first attempt

• NZ Q1 current account due Wed, Q1 GDP Thur (poll +0.9% q/q, +1.1% y/y)

• Range NZ 0.58205-255, support 0.5680 5580, resistance 0.5990-95 0.6012
NZD Hourly Bollinger Study


NZD Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

(Corrects RBA timing in second bullet)

• AUD/USD steady in overnight trading as Iran peace re-calibration continues

• RBA policy meeting outcome 0430 GMT, no change to 4.35% OCR anticipated

• AUD resistance formed 0.7089 Mon, unlikely to break ahead RBA announcement

• Trump says preliminary Iran deal already signed, details still unclear

• Israel states they are not bound by terms of the U.S.-Iran agreement

• Brent crude trading at 3-month lows, U.S. equities pushing record highs

• Overnight range 0.70645-885, support 0.6834, resistance 0.7089 0.7200 0.7283
AUD Hourly Bollinger Study & DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

MUFG Research previews this week's June BoJ meeting.

"The BoJ is expected to raise rates again this week but another Fed rate cut appears unlikely until the end of this year at the earliest. Japanese media reports last week set the stage for the BoJ to hike rates by 25bps this week, and indicated that the BoJ is considering pausing QE tapering from FY2027. A 25bps hike is already fully priced in so is unlikely to trigger a reversal of yen weakness on its own thereby encouraging a further build-up of yen shorts recently. The updated rate guidance is likely to rock the boat either by sticking to a path for further gradual tightening," MUFG notes.

"We expect another hike to be deliver by later this year. One potential source of market volatility will be press conference given that Deputy Governor Uchida will be stepping in for Governor Ueda who is ill. If the yen remains weak, it will keep pressure on Japan to intervene again to provide support. Intervention could prove more effective if energy prices continue to fall and Fed rate hike expectations are pared back," MUFG adds.

• GBP$ a tad firm in NY afternoon, +0.18% at 1.3427; Monday range 1.3460-1.3417

• Early bid on Mideast peace MOU faded near range top; Trump says strait to be reopened

• Israel-Hezbollah hostilities in Lebanon a wild card for peace; Iran nukes to be discussed

• Less-hawkish BoE policy view, UK political uncertainty may temper further GBP$ gains

• For now, pair remains anchored near middle of its 1.33-1.35 range

• GBP$ supt 1.3419/17- 200-DMA/Mon low, 1.3398 falling 10DMA, 1.3325 daily low June 11

• Res 1.3460 Monday high, 1.3487 daily cloud top, 1.3509 daily high May 25

GBP Chart:


(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

• NY opened near 1.1605 after 1.1575 traded overnight, rally extended early-on

• Soft USD, US yields & downward move in oil

buoyed the pair

• Rallies in gold, silver and equities also gave a boost, EUR/USD hit 1.1620

• USD & yields then firmed & gold, silver eroded some gains while USD/CNH moved upward

• EUR/USD erased the early NY gains, hit 1.1597, sat nearby late, the pair was up +0.30% late

• Rising daily RSI, move above the 10-DMA are encouraging tech signs for EUR/USD bulls

• Falling monthly RSI, long upper wick on today's candle could be worries for bulls however
eurusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• NY opened near 0.7075, the pair dipped down toward 0.7065 in early trading

• Buyers emerged as USD remained soft while yields , oil fell

• Gold & silver hit fresh session highs and stocks added to overnight gains

• AUD/USD hit 0.7088 then dipped as yields formed, gold & silver gave back some gains

• USD/CNH upward mover & some USD buying helped AUD/UDS near 0.7075 late

• The pair held onto most overnight gains and traded up +0.53% in NY's afternoon

• Move above the daily cloud base & 10-DMA and rising daily RSI gives bulls comfort

• RBA risk looms, rate expected to be unchanged, Bullock's news conference will be key
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Morgan Stanley Research previews this week's BoJ and RBA June policy meetings.

"We expect a rate hike to 1.0% at June MPM (June15-16). We also expect the BoJ to maintain JGB purchase amounts from April 2027," MS notes.

"We expect the RBA Board will leave the cash rate on hold at 4.35% at its 16 June meeting, following three consecutive hikes. The statement is still likely to lean hawkish as inflation pressures are broadening and the Board will remain alert to de-anchoring risk," MS adds.

• EUR/GBP meets headwind around 0.8650 after rising from 0.8633 (European morning low)

• 0.8650 was last week's high, on June 8 (0.8620 was two-week low, on June 9-10)

• Burnham set to challenge PM Starmer for Labour leadership if he wins by-election Thursday

• Starmer says child social media ban not linked to leadership pressure

• UK May inflation data due on Wednesday; CPI is forecast at 3.0% YY

• Bardella would halve France's EU net budget contribution if elected French president

EURGBP


(Robert Howard is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research previews this week's June FOMC meeting.

This week's FOMC is one of the more highly anticipated meetings in some time. Not only is it the first under Chair Warsh, but it comes at a time when there's a reasonable case that the Fed's easing bias is likely to be removed. 

"In the FX market, there are 2-way risks to the USD going into the meeting. On one hand, a hawkish surprise seems more likely than a dovish one, given the contrast of the actual data flow with the already entrenched expectations of Warsh's dovish bias. This scenario could serve to further open the top end of Fed pricing distribution and allow the USD to more meaningfully test the top end of its well-established range.

On the other hand, despite Warsh's previously expressed views, the market is already priced for a full hike this year, and nearly an additional one next year. Should Warsh double-down on dovish arguments (see below), and/or if the SEP were to reflect a reluctance of the broader committee to lean hawkish, the USD could retreat further into its range," BofA adds.