Ceasefire see stocks up, dollar down as risk-on continues
Updated Updated Tue, 2025 June 24 09:08
* US President Trump rebukes Israel and Iran hours after ceasefire agreed
* Nasdaq closes at a record high on positive risk sentiment
* Brent crude down again, off around 16% from Monday’s high at $79.50
* Fed’s Powell echoes wait and see remarks, pours cold water on a July rate cut
FX: USD continued its move lower as oil again fell quite sharply, down another 4%. Safe-haven allure continued to unwind on Tuesday after US President Trump declared a ceasefire between Israel and Iran; albeit it did see violations from both sides throughout the day.The recent dovish front from some Fed officials, Waller and Bowman – both Trump appointees – wasn’t followed by Chair Powell in his testimony. He reaffirmed the wait-and-see stance, with hawkish remark from other officials. Odds on a near-term rate cut didn’t change too much, with around a 20% chance of a July 25bp rate reduction and a September move near-fully priced in.
EUR built on Monday’s bullish momentum and ‘outside day’ and printed a new high at 1.1641, last seen in October 2021. The recent fading of ECB rate cut bets has seen narrower yield differentials support the single currency versus the dollar. Germany’s IFO business sentiment survey was largely in line with estimates. The euro continues to also benefit from the buildup of dollar shorts, though prices eventually closed below the previous top at 1.1631. There were media reports of EU retaliatory tariffs versus the US ahead of the July talks deadline.
GBP made a fresh three-year cycle high at 1.3647 but closed just below the prior recent peak at 1.3631. Prices bounced off the 50-day SMA again on Monday at 1.3407. The bullish outside day, like in EUR/USD, should see more upside. There was a heavy BoE speaker schedule, including Deputy Governor Ramsden who remarked his dovish dissent was based on a material loosening of the labour market. He did not see such a vote as being inconsistent with the MPC’s ‘gradual and careful’ approach.
USD/JPY moved lower as the yen led the majors despite the unwind of the safe haven premium. The collapse in oil prices benefitted JPY due to Japan being a net energy importer. Reports suggest that the economy minister is arranging to visit the US later this week for tariff talks.
AUD continued its strong bid and rejection of lower prices from Monday. Eyes are on the monthly CPI data. CAD strengthened for a second day having tapped the 50-day SMA on Monday at 1.3793. Headline annual CPI came in unchanged, but core measures decelerated notably, which is a step towards another rate cut next month.
US stocks: The S&P 500 added 1.11% to settle at 6,092. The Nasdaq closed up 1.53% at 22,191, a record close. The Dow Jones finished higher at 43,089, adding 1.19%. Energy again led the losers (-1.51%) with only consumer staples also in the red (-0.03%). Tech, Financials and Communication Services led the gainers. The Middle East ceasefire added fire to the bulls’ case even though Fed Chair Powell reiterated his views that rate cuts can wait. He stated that the Fed expect to see meaningful tariff inflation effects in June, July and August. However, he said “if we don’t see that, that would lead to cutting earlier”.
Asian stocks: Futures are in the green. Asian markets traded firmer as stocks took the de-escalation and ceasefire in the Middle East as a positive sign. The ASX 200 saw most sectors higher though gold miners and energy producers were in the red on lower oil and gold. The Nikkei 225 tested the 39,000 level as it tried to break to the upside. The Hang Seng and Shanghai Comp were bid on the broad risk tone with the mainland index hitting a three-month high led by tech and carmakers.
Gold sold off as risk sentiment continued to remain positive. Falling oil prices do potentially mean less inflationary pressures going forward and possibly more chance of policy easing from the Fed.
Day Ahead – Australia CPI
Australian weighted y/y inflation is forecast to print one-tenth lower at 2.3%. This would be the fourth straight month that has occurred and the tenth consecutive month it is within the 2-3% RBA target range. The annual trimmed mean is expected to ease to 2.5% from 2.8% in April. Being the second month of the quarter, May provides an update on some of the quarterly survey services, while it is seasonally a soft month. There are some upside risks to inflation in the second quarter, which may give pause for thought for the RBA.
Chart of the Day – AUD/USD false breakdown
Amid a lot of notable price action on Monday, the aussie fell sharply through the first half of the day from just below 0.65 to a low at 0.6372. But from there, buyers stepped in as the risk mood changed and this saw the major close back above the 200-day SMA and 50-day SMAs at 0.6424 and 0.64446respectively. The latter has crossed above the longer-term moving average meaning a bullish golden cross. The strong rejection of lower prices means upward momentum has picked up with key resistance at a major Fib level (61.8%) of the September to April decline at 0.6549.
