Daily forex roundup: Geopolitical tensions drive safe-haven flows, oil prices higher

Global geopolitical concerns escalated, bolstering the dollar and crude oil, while some pacific currencies saw mixed trading.

Geopolitical tensions dominate

• The dollar found support amid reports of new attacks in the Middle East and the reported closure of the Strait of Hormuz by Iran, following US strikes on Iranian targets, as per headlines. This fueled safe-haven demand, impacting broader markets.
• According to the US military, new attacks against Iran were launched on Sunday. Escalating tensions reportedly led to a rise in oil prices, while equity futures softened.
• On an intraday basis, our strength gauge ranks the Canadian Dollar weakest — a notable divergence, since rising oil prices would typically offer the currency support. The dollar generally strengthened against other majors.

Pacific currencies diverge

• The Australian Dollar came under pressure in broader trading, falling below 0.6950 amid escalating geopolitical concerns — a move that overrode the intraday strength our gauge had flagged earlier in the session.
• In contrast, the New Zealand Dollar saw support from local economic data, as the country's services sector expanded in June, with the Performance of Services Index (PSI) reaching 50.6. This indicated a return to growth.
• Bank of America (BofA) noted that the Japanese Yen's downtrend reached a four-year extreme amidst increasing political fears.

Key events this week

• Traders await crucial US economic data, including the US CPI report, and remarks from the Federal Reserve Chair, which are expected to take center stage and could test the dollar's recovery.
• In the UK, reports point to an expansive autumn budget, with speculation that the fiscal statement could be merged with a spending review.

Our proprietary metrics show an MRS of 64, indicating moderate readiness, while the CTS is high at 80. The FSI stands at 60 (Neutral).