In a critical economic environment, the Federal Reserve has released the minutes from the June 16-17 Federal Open Market Committee (FOMC) meeting, highlighting a split among policymakers regarding strategies for inflation and interest rates. Although the decision was made to keep US interest rates steady, several hawkish members advocated for an increase in June, ultimately agreeing to wait for more evidence before acting.
Two weeks later, a payroll report indicated that job conditions had deteriorated. However, the main topic of discussion remained inflation, which continues to be a priority for the Fed and is still elevated. Policymakers did agree to amend the language by eliminating any easing bias and opted to wait for forthcoming economic data for direction.
It is also significant to note that both the headline CPI and PCE figures are above 4.0 percent, raising considerable concern for Fed policymakers, indicating that inflation remains unchecked and needs addressing. The Fed aims for an inflation target of 2 percent.
The global economic landscape faces renewed risks due to the escalating tensions between the US and Iran, which could severely disrupt the economic stability that was beginning to develop if the two nations do not quickly resolve their issues.
President Donald Trump has announced the termination of the MoU with Iran, a troubling sign unless there is a reversal, especially as both sides exchange aggressive statements.
Brent oil, which briefly surged to $80 last week, could rise again if both countries do not soon reach an agreement, thereby increasing the risk of economic turmoil. All eyes are once again on the Gulf region to see whether activity in the Strait of Hormuz returns to normal or is only partially restored. Any escalation in conflict will further diminish the likelihood of normal operations.
A closure would undoubtedly elevate oil prices, bolster the US dollar due to its safe-haven status, and heighten liquidity concerns that would exert pressure on gold prices.
This scenario is unfavourable for the global stock markets, hindering further growth. Overall, these conditions contribute to inflationary pressures, which are a primary concern for global central banks and market participants hoping for eased inflation and reduced risks of interest rate hikes.
Amid all the geopolitical tensions rooted in US-Iran conflict, the trade friction involving the US dollar and the rest of the world cannot be overlooked.
Last week’s support level of 162.80-90 proved strong, allowing the Japanese yen to find shelter and subsequently recover amid fears of intervention by the Bank of Japan (BOJ).
The yen is currently trading near record lows, the lowest in 39 years. The release of Japan’s intervention data later this month will shed light on the likelihood of a recent correction, as the yen gained some strength leading up to the weekend.
The conflict in the Middle East is contributing to rising costs of goods, and increasing oil prices place additional pressure on the Japanese currency, given that Japan imports almost 90% of its oil from that region.
This introduces the risk that if the 162.80-90 support gives way, it may open the path to 164. Conversely, keep an eye on 160.70 for the next move, which could stem from potential administrative actions.
This week, attention will be directed toward the US Consumer Price Index (CPI), which may be softer due to declining oil prices that have significantly lowered energy costs. Much depends on service sector inflation, an important component of price tracking.
US retail sales data will be released on Thursday. A decrease in fuel prices should help soften this data. Housing starts are scheduled for Friday and are expected to rise following last month’s decline, although indicators suggest that over-activity may be slowing, likely due to soaring construction costs.
Meanwhile, gold has been experiencing heightened volatility, a trend expected to persist. The conflict between the US and Iran plays a significant role in determining future price movements.
Elevated oil prices present two risks: inflation and US dollar liquidity. Currently, the ongoing conflict is influencing prices for both gold and oil. Other central banks, aside from China, are also cautious about purchasing gold aggressively due to potential US dollar supply challenges amid rising demand.
The movement of oil prices will be crucial for market direction. Prices above $80 do not bode well for importing nations, and such developments would likely negatively impact the global stock market.
It is important to note that countries have been drawing from their strategic oil reserves, which are intended for emergencies. These reserves have not been fully replenished. Current estimates of strategic inventories stand at approximately 1.3 billion barrels in China, 780 million in the US, 215 million in Japan, and around 175 million in Europe. However, it is challenging to ascertain the exact amount that has been utilized.
This situation does not support significant increases in gold prices. Any investor attempts to drive prices up are countered by reports of skirmishes in the Gulf region, which push gold prices down.
For gold to rise towards $4350, it must first surpass $4298. However, there remain substantial downside risks, as a breach below $4002 could lead to declines toward $3910 or even $3850. Hence, volatility in prices is expected to continue to dominate.
WEEKLY OUTLOOK - July 13-17
#GOLD @ $4121- Gold is required to surpass $4210 to test $4260. On the downside break of $4018 will encourage or $3965 or $3910.
#EURO @ 1.1414- A clear break of 1.1475 will encourage for 1.1510. A fall below 1.1335 risks for 1.1290.
#GBP @ 1.3407- The upside looks limited unless it breaks 1.3475 for 1.3505. Pound Sterling has support at 1.3318 and at 1.3280.
#JPY @ 161.70- Only a move above 162.90 will encourage for 163.50. However a fall below 160.70 could challenge 160.02 or lower.
Copyright Business Recorder, 2026
The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper
He tweets @asadcmka