FX WRAP: Israel-Iran conflict benefits USD, while CAD outperforms on crude rally

Analysis details (20:35)

USD was broadly firmer against peers, regaining its haven attraction. The Israel attack on Iran left geopolitics dominating headlines and price action in FX, crude, and bonds. The buck outperformed against all major peers ex-CAD, even outperforming other safe havens, CHF, and JPY. Since the Israel attack, Iran has sent multiple waves of attacks, leaving the impression into the weekend that this time the conflict won't be so quickly resolved as it was last year. Separately, US data saw much better-than-expected UoM prelim results for June, though a market reaction was largely absent. As the day progressed, Dollar managed to hold onto gains, with the inflationary theme that comes alongside a surge in crude prices supporting a rally in US yields, and as such limiting any pullback in USD.

G10 FX was largely lower to end the week, on account of the surging dollar as opposed to anything currency specific. As mentioned above, the tape was dominated by geopolitics after the Israeli attack on Iran, which aided the Dollar and saw Antipodeans underperform given the broader risk-off sentiment. AUD/USD and NZD/USD printed lows of 0.6457 and 0.5996, respectively, against earlier peaks of 0.6533 and 0.6069. CAD outperformed and managed to eke out marginal gains vs. the Buck as it benefited from the surge in oil prices.

Safe-havens, CHF and JPY, were actually weaker despite the aforementioned global risk off, with the Yen watchers awaiting the BoJ next week, whereby the bank is expected to stand pat on rates with money markets currently pricing in 12bps of tightening by year-end. GBP was dictated by the USD with Cable trading between 1.3517-3632, as participants await UK CPI and BoE next week. The latter is expected to see policymakers stand pat on policy, although the recent soft labour market data and growth metrics from the UK could lead to some dovish dissent on the MPC.

EM: The Peru Central Bank, as expected, maintained the reference rate at 4.5%, expecting annual inflation to remain on the lower end or target range in the coming months and expects core inflation to remain around 2% on the projected horizon; USD/PEN closed modestly higher. Meanwhile, the RBI is likely selling USD to support the INR due to the spike in oil, said traders cited by Reuters. For Brazil, the latest Reuters Poll signalled 27/39 surveyed see the BCB holding the benchmark rate at 14.7% on June 18th, while the remaining 12 see a 25bps hike.

13 Jun 2025 - 20:35- ForexGeopolitical- Source: Newsquawk