🌍 Middle East Remains Unstable, but Market Focus Shifts to FOMC
Iran at a Disadvantage; Hopes for Peace Rise as Markets Stay Calm
Tensions between Israel and Iran continue, but diplomatic moves are emerging. After Russia’s President Putin signaled interest in mediating, former U.S. President Trump also began taking a more active role in brokering a ceasefire. Trump has cut his G7 summit attendance short to focus on the Middle East issue, raising hopes for an early resolution.
Militarily, Israel maintains air superiority, leaving Iran struggling to mount an effective counterattack. Market participants are now watching for whether Iran might seek a face-saving exit from the conflict—possibly even declaring surrender in some form.
💱 Markets Remain Calm
Oil and Gold Stay Elevated; USD Weakness Persists
Despite the continued conflict, currency and equity markets remain composed. Crude oil and gold remain elevated, but there’s little sign of panic across risk assets. The U.S. dollar continues its weakening trend.
The Bank of Japan today kept its policy rate unchanged at 0.50% and announced a gradual reduction in bond purchases starting in April 2026 (¥200 billion per quarter). The outcome matched expectations and caused no surprises.
🇺🇸 Next Focus: U.S. FOMC
Rate Hold Priced In, All Eyes on Powell’s Comments
Market attention is now shifting to the upcoming FOMC meeting. A rate hold is fully priced in, with the spotlight now on Fed Chair Powell’s press conference. Key questions include:
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How will tariffs affect inflation?
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How does this align with the two expected rate cuts priced in for this year?
The dollar could see renewed volatility depending on Powell’s tone and guidance.
📊 Key Economic Data (Expected Today)
Markets will be watching the following U.S. and global data releases:
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U.S. Retail Sales (May)
Forecast: -0.6% MoM (Prior: +0.1%)
Core (ex-autos/gas): +0.3% (Prior: +0.2%) -
Import/Export Price Index (May)
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Industrial Production (May)
Forecast: ±0.0% (Prior: ±0.0%) -
NAHB Housing Market Index (June)
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Germany ZEW Economic Sentiment (June)
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Canada International Securities Transactions (April)
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Hong Kong Employment Report (May)
The retail sales data in particular could be a turning point for U.S. dollar sentiment ahead of the FOMC.
📝 Summary and Strategy View
The G7 is expected to issue a strong political message, backing Israel while identifying Iran as a destabilizing factor. If Iran shows signs of de-escalation or diplomatic retreat, markets could rapidly shift into a “risk-on” mode.
Watch closely for the U.S. retail sales release and prepare for increased USD volatility leading up to the FOMC. Flexible position management is essential during this phase.
