In the foreign exchange market, rising geopolitical tensions have taken center stage, overshadowing the effects of the recent Federal Open Market Committee (FOMC) meeting. According to OCBC FX analysts Frances Cheung and Christopher Wong, the GBP/USD exchange rate currently hovers near the 99 mark.
Risk Aversion Pressures Currencies
Market sentiment is dominated by risk aversion due to growing concerns over conflict in the Middle East. Bloomberg headlines such as “US Eyes Iran Attack This Weekend” and “US Plans to Respond to Iran Attacks Are Evolving” have heightened uncertainty. This risk-off mood is pressuring risk-sensitive currencies within the Group of Seven (G7), including the Australian and New Zealand dollars. Similarly, the South Korean won has weakened among Asian currencies (AxJ).
Oil Prices Threaten Asian Currencies
As geopolitical tensions persist without signs of easing, oil prices face upward pressure. This trend could disproportionately impact net oil-importing Asian currencies such as the Philippine Peso, Indian Rupee, Korean Won, New Taiwan Dollar, and Thai Baht. The volatile situation calls for caution as the weekend approaches, especially with US markets closed today in observance of the Juneteenth holiday.
US Dollar Index Shows Mixed Signals After FOMC
Following the FOMC announcement, the US dollar index dipped slightly. The Fed’s dot plot indicates expectations for two interest rate cuts this year. However, wide divergence among the dots reflects growing uncertainty in market outlooks.
Technical indicators reveal a mildly bullish momentum, with the Relative Strength Index (RSI) rising. The dollar index faces resistance at the 99.50 level, coinciding with the 50-day moving average. If this level is breached, the index could test higher resistance points at 100.2 and 100.6, which align with the 23.6% Fibonacci retracement from the 2025 high to low. On the downside, support stands at 98 and 97.60, near recent lows.
Related topics:
