Middle East tensions drive dollar and yen to extremes; euro holds gains

Geopolitical tensions in the Middle East fueled safe-haven demand, pushing the dollar higher and the yen to multi-decade lows, while the euro held gains on hawkish ECB expectations.

Geopolitical risks and safe havens

After several sessions in which gold fell despite the geopolitical tension — the broken safe havens we unpacked earlier this week — the metal reverted to its classic haven role today, rebounding above $4,050 as safe-haven demand intensified.

• The US dollar climbed higher, driven by safe-haven demand amid rising Middle East tensions. FXStreet reported the dollar's rise as Middle East tensions elevated oil.
• Iran has reportedly stated that US and allied interests would be affected if the US attacks Iranian nuclear facilities. This sentiment contributed to the dollar's safe-haven appeal.
• The Japanese yen fell to its lowest level in 40 years against the US dollar, with USD/JPY trading at a 40-year high. This reflected increased demand for the dollar as a safe haven.
• Gold rebounded above $4,050, benefiting from intensified safe-haven demand spurred by the persistent tensions between the United States and Iran.

Major currency moves

• On an intraday basis, our strength gauge ranks the euro as the strongest major currency, maintaining gains above 1.1400. This strength was supported by aggressive European Central Bank (ECB) expectations, despite ongoing US-Iran tensions.
• The Australian dollar was the weakest performer according to our intraday metrics, with headlines noting it failed to advance with conviction.
• The British pound saw some selling pressure, despite a decent employment report. Fiscal concerns reportedly weighed on the currency, though GBP/JPY held above 218.00, marking an annual year-to-date peak.
• In Japan, June trade data showed a deficit of 406.906 billion yen, although exports for the month were higher than expected.
• Reuters expects the Federal Reserve to maintain interest rates next week, amid what is described as an oil shock.

Key events today

• GBP · CPI y/y: SCHEDULED — forecast 2.7%, previous 2.8%