Forex Today: Major currency pairs stabilize as focus remains on US-Iran talks
Here is what you need to know on Tuesday, June 2:
The action in financial markets quiet down early Tuesday as investors take a step back to assess the latest developments in the Middle East. In the European session, the Eurostat will publish the preliminary May Harmonized Index of Consumer Prices (HICP) data, the European Central Bank's preferred measure of inflation, for the Eurozone. In the second half of the day, JOLTS Job Openings data for April will be featured in the US economic calendar.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | -0.11% | 0.22% | 0.27% | -0.15% | 0.60% | 0.55% | |
| EUR | -0.06% | -0.19% | 0.15% | 0.21% | -0.21% | 0.55% | 0.48% | |
| GBP | 0.11% | 0.19% | 0.37% | 0.40% | -0.02% | 0.74% | 0.65% | |
| JPY | -0.22% | -0.15% | -0.37% | 0.08% | -0.33% | 0.39% | 0.31% | |
| CAD | -0.27% | -0.21% | -0.40% | -0.08% | -0.44% | 0.31% | 0.25% | |
| AUD | 0.15% | 0.21% | 0.02% | 0.33% | 0.44% | 0.76% | 0.70% | |
| NZD | -0.60% | -0.55% | -0.74% | -0.39% | -0.31% | -0.76% | -0.09% | |
| CHF | -0.55% | -0.48% | -0.65% | -0.31% | -0.25% | -0.70% | 0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Following news of Iran's negotiating team stopping message exchanges through mediators with the US in protest against attacks on Lebanon, safe-haven flows started to dominate markets. In turn, the US Dollar (USD) gathered strength against its rivals, with the USD Index rising more than 0.2% on Monday, and the barrel of West Texas Intermediate (WTI) rose nearly 5% as Iran also threatened to completely block the Strait of Hormuz and the Bab El-Mandeb Strait if necessary.
Meanwhile, US President Donald Trump stated that he called Israeli Prime Minister Benjamin Netanyahu and asked him not to proceed with a major raid on Beirut, and that Israeli troops were turned around. Additionally, Trump told ABC News that he believes a deal to reopen the Strait of Hormuz and extend the ceasefire with Iran is reachable “over the next week.” Moreover, citing a regional source, CNN reported that US-Iran negotiations were back on track, hours after Iran suspended talks over Israel’s offensive in Lebanon. US stock index futures trade marginally lower following these developments, reflecting a cautious market stance in the European session, while the USD Index holds steady slightly above 99.00.
EUR/USD rebounds toward 1.1650 after closing in negative territory on Tuesday. Annual HICP inflation expected to rise to 3.2% in May from 3% in April.
GBP/USD clings to moderate gains above 1.3450 in the European morning. Later in the day, Bank of England (BoE) Governor Andrew Bailey will testify before the Lords Economics Affairs Committee.
USD/JPY trades in a tight channel near 159.70 after closing marginally higher on Monday. The minutes of the Bank of Japan's (BoJ) meeting between the bank and financial institutions showed on Tuesday that the BoJ received a sizeable number of requests to pause or slow the pace of tapering in its bond purchases from fiscal 2027 onward, per Reuters.
Gold rebounds after losing 1% on Monday and trades comfortably above $4,500 in the European morning on Tuesday.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
