Last week, US indices attempted to resume their upward trend after a correction. They received moderate support from the US and Iran's ceasefire agreement. In addition to that, the US non-farm payrolls report came in below expectations, which likely prompted the Federal Reserve to avoid rushing to hike its key interest rate.
Weaker-than-expected US labour market data didn't help the dollar, instead putting it under pressure. The USD/JPY pair, in particular, saw a significant decline. This drop, however, was driven by both weak US economic data and, likely, intervention from the Bank of Japan, which is clearly dissatisfied with the yen's excessive depreciation.
Brent crude prices continued to fall, briefly dropping to $70.80 per barrel, the lowest level since the Middle East conflict started. Prices are under pressure as a result of the resumption of oil shipments through the Strait of Hormuz, the return of UAE oil exports to pre-crisis levels and a significant increase in exports from Iran.
Germany. Manufacturing production
Germany's economy is focused on manufacturing. That means that it needs energy to function normally. The conflict in the Middle East negatively affected the supply of these resources. The closure of the Strait of Hormuz caused oil prices to spike, and high energy costs brought manufacturing levels down. Global analysts expect the country's manufacturing numbers to decline during the reporting period. That weighs negatively on the euro since Germany has the largest economy in the Eurozone. In this context, EUR/USD may decline to 1.1340.
RBNZ's key interest rate decision
New Zealand's annualised inflation rate is holding at 18-month highs, with price increases being observed across most categories of goods and services. GDP growth, meanwhile, remains modest, albeit fairly steady. This macroeconomic context gives global analysts grounds to anticipate that the Reserve Bank of New Zealand will raise its key interest rate at its upcoming meeting as part of measures to curb rising inflation. A move to tighten its monetary policy is good news for the New Zealand dollar. In this context, NZD/USD could climb to 0.5820.
US Federal Reserve meeting minutes
The US Federal Reserve kept interest rates unchanged at its June meeting. The regulator noted that economic activity continues to expand at a solid pace, despite persistent high uncertainty that is partly linked to the conflict in the Middle East. Fed officials also highlighted that inflation remains above the 2% target. In this context, expectations have grown that the regulator will raise its key interest rate by the end of the year. The US regulator's continued hawkish monetary policy stance is good news for the US dollar but negative for dollar- denominated assets, such as gold. As a result, XAU/USD prices could decline to around 4,060.00.