Iran strikes rattle markets as a soft US PPI pressures the dollar

Fresh US strikes on Iran lifted defensive assets and firmer oil today, while a soft US Producer Price Index reading weighed on the dollar and lifted the Australian dollar to the top of the intraday board.

Geopolitics in focus: Iran escalation

• The US military reportedly carried out another wave of strikes against Iran, and CENTCOM said it had ended the latest round, keeping geopolitical risk front and centre, according to FXStreet.
• Demand for safe havens and firmer energy prices rose on the escalation: WTI crude traded near $79.50 as tensions around the Strait of Hormuz persisted, per FXStreet, with Iran's IRGC signalling the waterway would stay closed.
• Gold drifted higher above $4,050, supported by the softer US inflation print even as the Iran escalation capped the move, as reported by FXStreet.

Dollar and inflation data

• An unexpected drop in the US Producer Price Index for June put pressure on the dollar and lifted major currencies, according to FXStreet.
• The Mexican peso gained as the softer inflation data weighed on the dollar.
• The Japanese yen briefly firmed on the US data before handing the move back, leaving its initial boost short-lived — and it remains near multi-year lows amid the Iran risk, per FXStreet.

Major currency moves

• The Australian dollar is the strongest currency on an intraday basis, according to our strength gauge, though headlines noted it "reclaimed a big figure and immediately lost its nerve," pointing to a volatile session.
• The British pound rallied, attributed to weakness elsewhere in the market, likely the US dollar.
• The EUR/USD pair is approaching 1.1600 with its Relative Strength Index turning bullish; even so, our strength gauge ranks the euro as the weakest major intraday, reflecting short-term selling pressure against a firmer technical backdrop.

Market sentiment and readiness

• Our market readiness gauge (MRS) stands at 60, indicating a moderate state of readiness.
• The carry trade score (CTS) is high at 81, while the market sentiment gauge (FSI) is at 61, signalling a state of Greed.

Key events today

• GBP · GDP m/m: SCHEDULED — forecast 0.0%, previous -0.1%
• USD · Retail Sales m/m: SCHEDULED — forecast 0.2%, previous 0.9%
• USD · Core Retail Sales m/m: SCHEDULED — forecast 0.0%, previous 0.8%
• USD · Philly Fed Manufacturing Index: SCHEDULED — forecast 12.7, previous 10.3