Weekly Preview: Focus Shifts to Fed PCE Inflation, GDP, and Micron

EUR/USD declines toward 1.1465 during Monday’s early European trading session as bearish momentum continues to dominate the pair.

The EUR/USD pair continues to weaken as uncertainty surrounding a potential US-Iran peace agreement weighs on market sentiment. Comments from US President Donald Trump regarding the possibility of renewed conflict in the Middle East have increased risk aversion, putting pressure on risk-sensitive assets such as the Euro and supporting demand for the US Dollar.

Meanwhile, diplomatic efforts have shown some signs of progress. Qatar and Pakistan announced that negotiations between the US and Iran in Bürgenstock, Switzerland, took place in a positive and constructive atmosphere. The mediators highlighted progress toward easing regional tensions, including agreements related to oil and petrochemical exports, the removal of restrictions, the release of certain frozen assets, and the launch of a major reconstruction and development initiative for Iran.

Despite the broader risk-off environment, hawkish comments from European Central Bank officials could help limit further losses for the Euro. ECB policymaker and Belgian central bank Governor Pierre Wunsch said the central bank may raise interest rates again as soon as next month if there is further evidence that inflation in the Eurozone is spreading beyond energy-related factors.

The ECB’s deposit rate currently stands at 2.25%, and financial markets are expecting additional 25-basis-point rate increases in September or October, with the possibility of another hike in the early months of next year.

Gold retreated slightly from its intraday advance above the $4,200 level but maintains a positive tone, marking its first gain after three consecutive sessions of losses. The precious metal continues to receive some support as easing concerns over inflation and interest rates weigh on crude oil prices, reducing fears of renewed price pressures.

The decline in crude oil prices follows a modest weekly opening gap higher after mediators Qatar and Pakistan announced a formal 60-day framework aimed at reaching a final US-Iran peace agreement. The development has helped ease inflation concerns and expectations of tighter monetary policy, providing some support for the non-yielding precious metal.

Despite this, expectations of further Federal Reserve tightening continue to limit Gold’s upside potential. Markets are pricing in a high probability that the Fed could raise interest rates again before the end of the year after last week’s hawkish guidance indicated that policymakers may need to maintain a restrictive stance if inflation remains persistent. Newly appointed Fed Chair Kevin Warsh also emphasized the importance of price stability during the post-meeting press conference, suggesting that the central bank may not move quickly toward rate cuts even amid slowing economic growth.

Meanwhile, ongoing geopolitical uncertainty continues to support the US Dollar and restrict gains in Gold. Iran has accused the US and Israel of violating the ceasefire and announced the closure of the Strait of Hormuz following continued Israeli strikes in Lebanon.

Looking ahead, traders will closely monitor developments surrounding US-Iran relations, which are likely to drive volatility across financial markets. Comments from key Federal Reserve officials will also influence USD demand and provide direction for the precious metal.

Oil prices turned lower on Monday after early gains faded as Iran reported significant progress in peace negotiations with the United States in Switzerland. However, concerns over renewed military tensions remain after US President Donald Trump warned of possible further action against Iran over Hezbollah attacks on Israel, keeping uncertainty elevated in energy markets.

Both benchmarks had declined sharply the previous week, losing nearly 10% as optimism grew that an interim peace agreement could ease tensions in the Middle East and improve the outlook for global oil supplies.

Iranian Foreign Minister Abbas Aragchi said that major progress had been achieved during four-party discussions held in Switzerland. Meanwhile, Qatar’s foreign ministry confirmed that technical negotiations would continue at the Bürgenstock resort, with discussions focused on maintaining the ceasefire framework, improving maritime security, and establishing a communication channel to support the safe movement of commercial vessels through the strategically important Strait of Hormuz.

The talks followed a 60-day interim peace agreement mediated by Qatar and Pakistan, bringing together US and Iranian officials to address issues including sanctions relief, regional security, and future negotiations related to Iran’s nuclear programme.

Despite signs of diplomatic progress, tensions remain fragile. Iran recently announced the closure of the Strait of Hormuz, citing continued Israeli military operations in Lebanon and alleged violations of commitments under the interim agreement.

Markets will continue to monitor developments from the US-Iran negotiations in the coming days, as the outcome of the diplomatic process is likely to determine the next major move for crude oil prices.

US stock index futures pared early losses on Sunday evening after Iran indicated that progress had been made during weekend peace negotiations with the United States in Switzerland. The initial decline in futures markets came as investors reacted to renewed concerns over Middle East tensions following US President Donald Trump’s warning of possible additional military action against Iran despite ongoing diplomatic efforts.

The rebound followed comments from Iranian officials and mediators suggesting that negotiations had moved forward, helping ease some concerns about an escalation in regional conflict.

The conflicting signals surrounding the negotiations have highlighted the fragile nature of the current ceasefire framework and raised questions over whether a broader peace agreement can be achieved. The two sides are expected to continue discussions over the next 60 days, including talks related to Iran’s nuclear programme and regional security.

Meanwhile, Wall Street enters the week with positive momentum following strong gains in technology stocks. US equities ended Thursday’s session higher, supported by continued optimism surrounding artificial intelligence and semiconductor companies

Investors will now focus on upcoming US economic data, including purchasing managers’ index figures, revised first-quarter GDP data, and the May Personal Consumption Expenditures (PCE) price index. The PCE report, which is the Federal Reserve’s preferred inflation measure, will be closely monitored for signals about the future path of interest rates.