Forex Today: Markets focus on geopolitics as Iran-Israel conflict deepens
Here is what you need to know on Monday, June 16:
Market participants remain cautious at the beginning of the week as tensions in the Middle East rise, with Iran and Israel exchanging missile strikes. In the second half of the day, the Federal Reserve Bank of New York will publish the Empire State Manufacturing Survey for June. Later in the American session, the US Treasury will hold a 20-year note auction.
US Dollar PRICE This month
The table below shows the percentage change of US Dollar (USD) against listed major currencies this month. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.83% | -0.72% | 0.00% | -1.69% | -1.04% | -1.19% | -1.34% | |
| EUR | 1.83% | 1.16% | 1.84% | 0.14% | 0.85% | 0.98% | 0.51% | |
| GBP | 0.72% | -1.16% | 0.69% | -0.99% | -0.30% | -0.34% | -0.64% | |
| JPY | 0.00% | -1.84% | -0.69% | -1.68% | -0.94% | -1.03% | -1.27% | |
| CAD | 1.69% | -0.14% | 0.99% | 1.68% | 0.76% | 0.65% | 0.36% | |
| AUD | 1.04% | -0.85% | 0.30% | 0.94% | -0.76% | 0.14% | -0.34% | |
| NZD | 1.19% | -0.98% | 0.34% | 1.03% | -0.65% | -0.14% | -0.47% | |
| CHF | 1.34% | -0.51% | 0.64% | 1.27% | -0.36% | 0.34% | 0.47% |
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).
The military conflict between Israel and Iran, which started early Friday, continues for the fourth consecutive day. On Sunday, Israel said that they killed the chief of Iran's armed forces intelligence unit. According to Iran's health ministry, more than 200 people have been killed in Israeli attacks. Meanwhile, several news outlets reported that Iranian missiles hit Israel’s largest oil refinery located in Haifa Bay.
Over the weekend, United States (US) President Donald Trump called upon Iran and Israel to make a deal. "We will have peace, soon, between Israel and Iran! Many calls and meetings now taking place," he added on Truth Social.
The US Dollar (USD) Index trades marginally lower on the day at around 98.00 in the European morning and US stock index futures stay in positive territory. On Wednesday, the Federal Reserve (Fed) will announce the interest rate decision and publish the revised Summary of Economic Projections (SEP), the so-called dot plot.
Gold started the week on a bullish note and climbed to its highest level in nearly two months above $3,450 before losing its traction. At the time of press, XAU/USD was down about 0.5% on the day below $3,420.
Crude oil prices shot higher on Friday and the barrel of West Texas Intermediate (WTI) rose more than 10% for the week. WTI corrects lower early Monday and trades slightly above $71.00, losing about 2% on the day.
Following Friday's decline, EUR/USD edges higher toward 1.1600 in the early European session on Monday.
The data from China showed earlier in the day that Retail Sales rose by 6.4% on a yearly basis in May. This reading came in better than the market expectation of 5%. In this period, Industrial Production expanded by 5.8%. AUD/USD holds its ground and trades in positive territory above 0.6500 on Monday.
GBP/USD ended the previous week higher despite posting daily losses on Friday. The pair clings to small daily gains and trades within a touching distance of 1.3600 in the early European morning.
USD/JPY struggles to find direction at the beginning of the week and fluctuates in a relatively tight channel above 144.00. The Bank of Japan will announce monetary policy decisions in the Asian session 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.
