Risk Rally Extends on Peace Deal Optimism; Focus Turns to Fed Meeting

Market Wrap-up: US-Iran Peace Progress Fuels Risk Rally Ahead of Fed MeetingMarkets extended the positive momentum established late last week as investors continued to price in the prospect of a peace agreement between the United States and Iran, which is expected to be signed in Switzerland. Risk sentiment also received an additional boost following the successful IPO of SpaceX.

Elon Musk’s company advanced another 20% in the latest session, helping the Nasdaq close more than 3% higher. The S&P 500 gained 1.5%, while the Dow Jones added nearly 1%, enough to lift the index to a fresh record high near the 52,000 mark.

The strong rally in US equities was mirrored by a sharp decline in oil prices. Both WTI and Brent crude fell nearly 5% during the session as markets priced in the potential reopening of the Strait of Hormuz, one of the world's most critical energy shipping routes. While analysts believe it could take several months for transportation flows to fully normalize, the market has already begun repricing geopolitical supply risks.

The advance also extended to precious metals, with spot gold rising 2.6% to USD 4,327.82/oz. The gold market appears to be looking beyond the conflict itself and increasingly pricing the post-war macro environment.

The peace agreement developments weighed on the US Dollar, pushing DXY down to 99.40 before recovering toward the 99.70 area during this morning's session.

The key event this week will be the Federal Reserve policy meeting, as rising inflation pressures continue to fuel debate over whether the Fed may be forced to raise interest rates later this year.

According to CME FedWatch, markets currently assign more than a 98% probability that the Fed will leave interest rates unchanged at Wednesday’s meeting. Investors will closely monitor comments from Fed Chair Kevin Warsh for further guidance on the monetary policy path in the second half of the year.

Looking ahead for today, the Bank of Japan (BoJ) is widely expected to raise its benchmark interest rate by 25 basis points to 1%, the highest level since 1995, in an effort to contain inflationary pressures and curb Yen weakness.

Meanwhile, the Reserve Bank of Australia (RBA) is expected to keep rates unchanged at 4.35%, marking a pause following three consecutive rate hikes earlier this year.

Markets will also focus on incoming US economic data, including Building Permits, Housing Starts, and ADP Weekly Employment Change.

XAU/USD: Gold Extends Gains as Rate Hike Expectations Ease

Key takeaway:

Gold prices extended gains on 15/06, marking a third consecutive daily advance after the United States and Iran announced that they had agreed on terms aimed at ending a conflict that has lasted nearly four months.

The development reduced expectations for further monetary tightening from major central banks.

According to CME FedWatch, the probability of a Fed rate hike in December has fallen to 58%, compared with nearly 70% a week ago.

However, the next directional move in gold is likely to depend heavily on the guidance provided by Kevin Warsh regarding the future interest rate trajectory.

Technical Outlook:

Daily Bias: Bearish

Support: 4,222

Resistance: 4,365

WTI: Oil Slides on Hormuz Reopening Expectations

Key takeaway:

WTI crude fell nearly 5% on 15/06 after US President Donald Trump announced that Washington had finalized an agreement with Iran to reopen the Strait of Hormuz, a key maritime corridor responsible for transporting roughly 20% of global oil supply.

According to Trump, the Strait of Hormuz will reopen without transit fees, while the United States will end its naval blockade against Iran.

Meanwhile, the US Strategic Petroleum Reserve (SPR) declined by 8.9 million barrels last week, marking the third-largest weekly drawdown on record and reducing government emergency stockpiles to 340.3 million barrels, the lowest level since 1983.

Technical Outlook:

Daily Bias: Bullish

Support: 76.79

Resistance: 85.00

DXY: US Dollar Weakens as Risk Appetite Improves

Key takeaway:

The US Dollar remained under pressure as improving global risk sentiment and anticipation ahead of the Federal Reserve meeting encouraged investors to rotate into risk-sensitive assets.

The primary catalyst was the framework agreement reached between the United States and Iran, which strengthened expectations of a de-escalation in geopolitical tensions.

Although a formal signing ceremony is scheduled to take place in Geneva this Friday, investors remain cautious while awaiting further details and confirmation of the final agreement.

Technical Outlook:

Daily Bias: Bearish

Support: 99.50

Resistance: 99.68

EUR/USD: Euro Advances on Improved Global Risk Sentiment

Key takeaway:

The Euro edged higher following the US-Iran agreement. Expectations that the Strait of Hormuz could reopen supported broader risk appetite, benefiting currencies such as the Euro against the US Dollar.

At the same time, European Central Bank Governing Council member and National Bank of Slovakia Governor Peter Kazimir appeared to reinforce the view shared by several policymakers that additional policy tightening may still be necessary, despite progress toward a peace framework between the United States and Iran.

Technical Outlook:

Daily Bias: Bullish

Support: 1.15862

Resistance: 1.16450

USD/JPY: Japanese Yen Strengthens After Hawkish BoJ Rate Hike  

Key takeaway:

USD/JPY maintained its downward trajectory and remained above the 160.00 threshold following the Bank of Japan’s monetary policy decision.

The BoJ delivered a hawkish move by raising its benchmark interest rate by 25 basis points to 1%, the highest level since 1995.

The rate increase is intended not only to address rising inflationary pressures but also to support the Japanese Yen and limit excessive currency weakness.

Technical Outlook:

Daily Bias: Bearish

Support: 159.80

Resistance: 160.40

Progress toward a US-Iran peace agreement remains the dominant macro driver across markets. The easing of geopolitical risk triggered a sharp decline in oil prices, supported a broad rally in equities, weakened the US Dollar, and encouraged demand for both risk assets and precious metals.

Markets are now shifting from geopolitical repricing to monetary policy expectations, with the Federal Reserve meeting and comments from Kevin Warsh set to determine whether current risk sentiment can be sustained.

Investors will also monitor upcoming US data for further clues on inflation and the policy outlook through the second half of the year.

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