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Dollar fell broadly in early trading after June CPI delivered a much larger-than-expected downside surprise, shifting market attention away from escalating geopolitical risks and back toward a more benign inflation outlook. Headline CPI fell -0.4% on the month while core CPI was unchanged, both undershooting expectations and challenging the aggressive repricing toward additional Federal Reserve tightening that had gathered pace over the past week. The softer inflation data also reduced the immediate significance of Fed Chair Kevin Warsh's first semiannual congressional testimony, giving policymakers greater flexibility to remain patient despite renewed strength in oil prices.

The inflation report arrived against a dramatically different geopolitical backdrop. Brent crude climbed above $87 after fighting between the United States and Iran intensified again. Iran launched ballistic missiles at a US air base in Jordan, while US forces carried out another extended wave of strikes against Iranian targets as both sides continued battling for control of the Strait of Hormuz. The renewed hostilities have further undermined confidence that last month's memorandum of understanding guaranteeing shipping through the Strait will evolve into a lasting peace agreement, keeping energy markets on edge and reinforcing concerns that higher oil prices could eventually feed back into global inflation.

Yet markets drew a distinction between today's inflation and tomorrow's inflation risks. June's CPI reflected the earlier decline in energy prices, with the energy component recording its largest monthly fall since April 2020, while shelter inflation slowed to its weakest monthly increase since January 2021. Those developments suggested underlying price pressures continued to moderate before the latest rebound in crude prices. Although the renewed surge in oil still poses an upside risk to future inflation, investors concluded the Fed now has more time to assess whether higher energy costs become embedded in broader price pressures before responding with additional tightening.

That shift substantially lowers the stakes surrounding Warsh's congressional appearance. Having repeatedly argued against providing explicit forward guidance, the new Fed Chair now has greater room to maintain that communication strategy. Rather than facing pressure to signal an imminent rate increase following Governor Christopher Waller's hawkish remarks on Monday, Warsh can point to softer inflation while emphasizing that policy will continue to depend on incoming data. Unless lawmakers force a more explicit discussion of future rate moves, the testimony is increasingly likely to produce few meaningful policy surprises.

Currency markets reflected the improved risk backdrop despite escalating tensions in the Middle East. For the week so far, New Zealand Dollar remained the strongest performer after hawkish comments from RBNZ Chief Economist Paul Conway reinforced expectations of additional policy tightening. Canadian Dollar benefited from higher oil prices, while Euro also traded firmly. By contrast, Dollar joined Yen and Swiss Franc among the week's weakest performers, suggesting investors were responding more to easing Fed expectations than to geopolitical headlines. Sterling and Australian Dollar traded in the middle of the performance rankings as markets balanced softer US inflation against persistent uncertainty over the global energy outlook.

US CPI Misses Forecasts at 3.5%, Core Inflation at 2.6%

US inflation slowed much more than expected in June, with headline CPI falling -0.4% on the month and core CPI unexpectedly flat. The sharp decline was driven by a 5.7% drop in energy prices, the largest monthly fall since April 2020, while shelter inflation also recorded its smallest monthly increase since January 2021. The softer data challenge recent Fed tightening expectations ahead of Fed Chair Kevin Warsh's congressional testimony. Read More.

AUD/NZD Tests Double Top Breakdown as RBNZ's Conway Revives Faster Tightening Bets

Paul Conway's latest speech suggests the RBNZ's inflation assumptions are already being challenged by the rebound in oil prices. He warned that New Zealand businesses now pass through higher costs more readily and are less likely to cut prices when costs ease, increasing the risk that temporary supply shocks become persistent inflation requiring a firmer monetary policy response. Read More.

Gold Slides as Oil Surges and Fed Hike Bets Build, Leaving $4,000 Increasingly Vulnerable

Gold extended its decline as Brent crude briefly climbed above $85 and markets sharply increased expectations for another Federal Reserve rate hike following hawkish remarks from Governor Christopher Waller. With traders awaiting US CPI and Fed Chair Kevin Warsh's congressional testimony, the psychologically important $4,000 level is looking increasingly vulnerable. A decisive break would shift focus to 3942.23, with the broader bearish trend targeting 3606.49. Read More.

Australia NAB Business Confidence Rebounds to -5 as Inflation Pressures Ease

Australia's NAB Business Survey showed business confidence rebounding sharply in June as fears over the Middle East conflict and energy prices eased. At the same time, purchase cost growth, final product price inflation and retail prices all moderated, suggesting the earlier oil shock had a smaller impact on inflation than feared. Read More.

Australia Westpac Consumer Sentiment Rebounds to 83.9, but Pessimism Still Runs Deep

Australia's Westpac–Melbourne Institute Consumer Sentiment Index rose 4.1% to 83.9 in July after the RBA paused its tightening cycle, easing fears of rapid further rate hikes. However, confidence remains among the weakest in the survey's 50-year history, while persistent inflation keeps attention firmly on the June quarter CPI report ahead of the RBA's August meeting. Read More.

NZIER QSBO Signals Improving Confidence but Sticky Inflation Risks

New Zealand's latest NZIER Quarterly Survey of Business Opinion showed confidence improving sharply in the June quarter as fuel prices eased, with a net 12% of firms expecting better economic conditions. However, hiring and investment intentions remained weak, while more than half of businesses reported rising costs and a growing number passed those increases on to customers, highlighting persistent inflation pressures for the RBNZ. Read More.

China Trade Data Crushes Forecasts as Exports and Imports Accelerate in June

China's trade growth accelerated sharply in June, with exports rising 27.0% and imports climbing 36.0%, both well above expectations. Semiconductor exports more than doubled to USD 38B, while stronger shipments to the US, ASEAN and the EU underscored resilient global demand. The main weak spot was crude oil imports, which fell -41% from a year earlier. Read More.

GBP/USD Daily Outlook

Intraday bias in GBP/USD stays neutral for consolidations below 1.3451. On the upside, firm break of 1.3459 will argue that whole correction from 1.3867 has completed, and target 1.3657 resistance for confirmation. On the downside, break of 1.3451 will turn bias back to the downside for 1.3139 support instead.

In the bigger picture, price actions from 1.3867 are a corrective pattern within the broader up trend from 1.0351 (2022 low). With 1.3008 support intact, medium term bullishness is maintained and break of 1.3867 is in favor for a later stage, towards 1.4248 key resistance (2021 high). However, firm break of 1.3008 will at least bring deeper fall to 38.2% retracement of 1.0351 to 1.3867 at 1.2524, with increased risk of bearish reversal.

US inflation slowed much more than expected in June, offering the first meaningful challenge to the recent surge in Federal Reserve tightening expectations. Headline CPI fell -0.4% mom, slowing from 0.5% mom in May, while the annual rate eased from 4.2% yoy to 3.5% yoy. Core CPI was unchanged on the month, bringing the annual core rate down from 2.9% yoy to 2.6% yoy. Both headline and core inflation undershot market expectations, suggesting the recent inflation spike may have been more concentrated in energy than previously feared.

The sharp improvement was driven overwhelmingly by energy prices. The energy index fell -5.7% mom after posting consecutive monthly increases of 10.9%, 3.8% and 3.9% over the previous three months, marking the largest monthly decline since April 2020. That more than offset continued increases in shelter and food prices.

Shelter inflation slowed further, rising just 0.1% mom, the smallest monthly increase since January 2021, while food prices increased a modest 0.2% mom. Together, the data suggest underlying inflation pressures continued to moderate once the temporary energy shock began to unwind, despite energy prices still standing 15.7% above their level a year earlier.

Attention now shifts to Fed Chair Kevin Warsh's congressional testimony, where investors will look for clues on whether policymakers view the softer inflation report as sufficient to temper recent rate-hike expectations or continue emphasizing the inflation risks posed by the renewed surge in oil prices.

Economic Data

Market Takeaways

• Both headline and core CPI undershot expectations, providing the first meaningful downside surprise in several months.
• The sharp fall in energy prices was the dominant driver, with the largest monthly decline in the energy index since April 2020.
• Shelter inflation continued to moderate, posting its smallest monthly increase since January 2021, while core CPI was flat.
• The report suggests inflation pressures were less broad-based than recent hawkish Fed rhetoric implied.
• The data challenge recent market repricing toward additional Fed tightening, although renewed oil price gains could reverse some of June's disinflation in coming months.

Full US CPI release here.

Brent price rallies for the second consecutive day on intensifying hostilities between the US and Iran that resulted in closure of strategic Strait of Hormuz and fueled fears about prolonged supply disruptions that may send fresh shockwaves towards already weakened western economies.

Oil price hit new highs of over one month on Tuesday and so far does not show signs of fatigue, as worsening geopolitical situation continues fueling bulls.

Technical picture on daily chart has also significantly improved as positive momentum strengthens, the price broke and closed above 200DMA ($78.53) and psychological $80 barrier on Monday, with Tuesday’s extension higher pressuring net pivotal barriers at $88.87 (Fibo38.2% of $119.18/$70.13) and psychological $90.

Formation of 5/200DMA golden cross and 10/20DMA bull-cross reinforces near-term structure, as bulls look for break above $88.87/$90 triggers to open way for further advance and validate reversal pattern.

Partial profit taking after strong rally cannot be ruled out in coming session and bulls are likely to face increased headwinds on approach to $90 zone, though dips, under current environment, should be shallow and mark positioning for further advance.

Potential corrective actions should be contained above $82.00 zone to provide better levels for re-entering bullish market.

Res: 88.00; 88.87; 90.00; 91.30
Sup: 85.80; 84.10; 83.70; 82.80

EUR/USD is still bounded in consolidations above 1.1323 and intraday bias stays neutral. With 1.1499 support turned resistance intact, further decline is expected. On the downside, break of 1.1323 will resume the fall from 1.2081 to 100% projection of 1.2081 to 1.1408 from 1.1848 at 1.1175. However, decisive break of 1.1499 will turn bias back to the upside for 1.1621 resistance.

In the bigger picture, focus is back on 38.2% retracement of 1.0176 to 1.2081 at 1.1353. Decisive break there will revive the case of medium term bearish trend reversal after rejection by 1.2 key cluster resistance level. Further fall should be seen to 61.8% retracement at 1.0904. Nevertheless, strong rebound from 1.1353, followed by break of 1.1621 resistance, will retain medium term bullishness.

Intraday bias in USD/JPY remains neutral as consolidations continue below 162.84. In case of another fall, downside should be contained by 38.2% retracement of 155.01 to 162.83 at 159.84. On the upside, firm break of 162.83 will resume larger up trend.

In the bigger picture, rise from 139.87 (2025 low) is seen as another rising leg of the long term up trend. Next target is 61.8% projection of 139.87 to 159.44 from 152.25 at 164.34. For now, outlook will remain bullish as long as 155.01 support holds, even in case of deep pullback.

Intraday bias in GBP/USD stays neutral for consolidations below 1.3451. On the upside, firm break of 1.3459 will argue that whole correction from 1.3867 has completed, and target 1.3657 resistance for confirmation. On the downside, break of 1.3451 will turn bias back to the downside for 1.3139 support instead.

In the bigger picture, price actions from 1.3867 are a corrective pattern within the broader up trend from 1.0351 (2022 low). With 1.3008 support intact, medium term bullishness is maintained and break of 1.3867 is in favor for a later stage, towards 1.4248 key resistance (2021 high). However, firm break of 1.3008 will at least bring deeper fall to 38.2% retracement of 1.0351 to 1.3867 at 1.2524, with increased risk of bearish reversal.

USD/CHF's rally is resuming by breaching 0.8139 resistance. Intraday bias is back on the upside. Current rise from 0.7760 should target 100% projection 0.7603 to 0.8041 from 0.7600 at 0.8198 next. For now, outlook will remain bullish as long as 0.8029 support holds, in case of retreat.

In the bigger picture, while a medium term bottom was formed at 0.7603, it's still early to call for bullish trend reversal. As long as 38.2% retracement of 0.9200 (2025 high) to 0.7603 at 0.8213 holds, the larger down trend could still continue through 0.7603 at a later stage. However, firm break of 0.7603 will argue that the trend has reversed and turn focus to 0.8332 support turned resistance (2023 low) for confirmation.

AUD/USD is extending consolidations above 0.6864 and intraday bias stays neutral. Further fall is expected as long as 0.6977 support turned resistance holds. Below 0.6864 will target 0.6832 support. Firm break there will target 0.6756 fibonacci level. However, sustained break of 0.6977 will bring stronger rebound to 0.7087 resistance instead.

In the bigger picture, considering bearish divergence condition in D MACD, a medium term top could be formed at 0.7277 after failing to sustain above 61.8% retracement of 0.8006 (2021 high) to 0.5913 (2024 low) at 0.7206. Deeper fall could be seen to 38.2% retracement of 0.5913 to 0.7277 at 0.6756 as a correction. But strong support should be seen there to bring rebound. Consolidations would continue below 0.7277 for a while.

USD/CAD's consolidations from 1.4247 continue and intraday bias remains neutral. Deeper pullback cannot be ruled out. But downside should be contained above 1.3965 resistance turned support. Above 1.4247 will resume the rally from 1.3480 to 61.8% retracement of 1.4791 to 1.3480 at 1.4290. Firm break there will pave the way back to 1.4791 high.

In the bigger picture, current development suggests that fall from 1.4791 has completed as a three wave correction to 1.3480. It's still early to judge if rise from there a corrective bounce, or resumption of the larger up trend from 1.2005 (2021 low). But in either case, retest of 1.4791 high should be seen next.

GBP/JPY is staying in consolidations below 217.99 and intraday bias remains neutral. Further rally is expected as long as 214.69 support holds. On the upside, above 217.99 will target 220.90 fibonacci projection level next.

In the bigger picture, the long term up trend is in progress. Next target is 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90. For now, outlook will remain bullish as long as 55 W EMA (now at 208.22) holds, in case of pullback.