The war in the Middle East triggered a huge shock in the market! Iranian missile retaliation has caused gold and oil to soar, Fed rate cut expectations surge

On Friday, Israel launched a fierce air strike on Iran, attacking Iran's nuclear facilities and missile factories and killing a large number of military avatradescn.commanders and nuclear scientists. Iran's national news agency Iran reported that in retaliation, Iran launched hundreds of ballistic missiles at Israel.

U.S. President Trump urged Iran to reach an agreement on its nuclear program, implying that Tehran rejected the U.S. ultimatum in negotiations to restrict uranium enrichment, and was blamed for the attack.

The dollar remained on the yen and Swiss franc this week amid concerns about Trump's tariffs. The dollar fell nearly 1% against the yen, marking its biggest weekly decline since mid-May. The dollar fell against the Swiss franc for the second consecutive week.

MonexUSA's trading director in Washington, Juan Perez said, "The sudden outbreak of the (Iran-Iran conflict) is caught off guard, but the core focus is still on the issue of tariffs and global trade. Once a physical war breaks out and the conflict may become long-term and expand, the US dollar and gold will immediately become safe-haven assets - essentially a psychological stress response."

Bank of Japan Governor Kazuo Ueda said this week that if I have enough confidence to believe that the potential inflation rate is close to 2% or fluctuates around 2%, we will raise interest rates. But market expects that the Bank of Japan will keep interest rates unchanged next week.

Magdalene Teo of Switzerland said that given the increased uncertainty caused by tariffs and concerns about Japan's possible fallout in a technical recession,The Bank of Japan is expected to keep interest rates unchanged next Tuesday. The market focus may be whether the Bank of Japan has any hints about the pace of bond purchases. Japan's Treasury yield curve has basically flattened in recent days as market expectations that the Ministry of Finance will adjust its issuance plan as early as next month. She said that given that these expectations have been digested by the market, if the government fails to take action, it may lead to another rise in Japan's Treasury yields. The Bank of Japan may slow down its pace of shrinking its bond purchases, but most people expect this to begin in the second quarter of 2026.

At the beginning of this week, optimistic news came from tariffs. U.S. Treasury Secretary Bescent said on Wednesday that as long as major U.S. trading partners show "sincerity" in the current negotiations, the Trump administration is willing to extend the existing 90-day tariff suspension period until after July 9. He also said, "If someone doesn't negotiate, then we won't negotiate."

But U.S. President Trump said on Thursday at a bill signing ceremony that he could raise U.S. auto tariffs to boost domestic auto manufacturing, a move that could further intensify tensions with trading partners.

Trump said that raising the current 25% auto tariff level could provide further protection for the domestic auto industry, and mentioned that GM plans to invest $4 billion in U.S. factories in the next two years to avoid tariffs. "I may raise this tariff level in the near future. The higher you raise, the more likely they are to build factories here.

Foreign Exchange Market:The US dollar index fluctuated overall downward trend this week. At the beginning of the week, the US dollar fluctuated around the 99 mark. On Wednesday, the US dollar opened a strong expectation of interest rate cuts within the year due to the overall lower than expected CPI data on Wednesday. The US dollar index opened a decline, hitting a new low in more than three years after a sharp decline for the second consecutive day. On Friday, the situation in the Middle East seemed to trigger the safe-haven attributes of the US dollar. The market stopped falling and closed back, closing at 98.16 this week, closing down for the second consecutive week. The weak dollar boosted the performance of non-US currencies, and the euro, pound, Canadian dollar, and Japanese yen all recorded an increase against the US dollar. Among them, the euro against the US dollar once stood above 1.16, the highest since November 2021; the pound against the US dollar hit a new high since February 2022.

Gold market:Spot gold rose this week under multiple support from the continued weakening of the US dollar, the Fed's interest rate cut expectations have risen and geopolitical tensions. At the beginning of the week, gold prices once fell below the $3,300 mark, and then driven by the escalation of tensions in the Middle East caused by the lower-than-expected CPI data and Israel's hit Iran, gold bulls re-dominated the pattern, and stood above the $3,440 mark on Friday and closed at 343 this week. $3.47/oz, up 3.68%. Silver rose for the second consecutive week, continuing to hover at its highest level since 2011, closing at $36.3/oz.

Crude oil market: International crude oil was avatradescn.completely "ignited" by the situation in the Middle East, and the overall fluctuation and upward trend this week was maintained, showing a structure of "stable first-sharp lift-high consolidation". After Israel launched air strikes on Iran on Friday, WTI crude oil futures dayIt once rose more than 13%, breaking through US$77 per barrel, the highest since February 3. Brent crude oil futures once exceeded US$76 per barrel, the first time since February 21, and rose by more than 9% intraday. The spot price of the two oils increased by more than 10% this week.

Review of the news this week

1. Trump's tariff policy "extends his life" and plans to send a letter to all countries to finalize the tax rate

The US Federal Circuit Court of Appeals decided on June 10 that during the trial of relevant cases, the US International Trade Court's previous ruling prohibiting the Trump administration from imposing tariffs. In other words, the Trump administration's tariff policies can still be implemented during the trial period.

On June 11, U.S. Treasury Secretary Becent said at a hearing on the House Means and Means avatradescn.committee in Washington that if the major U.S. trading partners show sincerity in negotiations, the Trump administration is willing to extend the current 90-day tariff moratorium until after July 9. Trump also said he was willing to extend the negotiation deadline, but believed it was not necessary.

U.S. avatradescn.commerce Secretary Lutnik expects trade deals with other countries to be announced starting next week and says the EU may be one of the last economies to reach a deal. The EU regards July 9 as an ideal time point for reaching a principled agreement, and further negotiations need to be finalized in the future.

2. The Fed's expectation of interest rate cuts in September has heated up, and Powell's successor list has been exposed.

The US CPI data in May are all lower than expected, with an unseasonal adjustment of CPI annual rate of 2.4%, lower than the market's expectations of 2.5%; the core CPI annual rate was 2.8%, lower than the expected 2.9%. A series of lower-than-expected inflation data suggests that consumers have not yet felt the full impact of tariffs.

After the inflation data was released, money market pricing showed that the probability of the Federal Reserve cutting interest rates in September was more than 80%. Trump once again called on the Fed to cut interest rates by 100 basis points, and Vice President Vance said the Fed's refusal to cut interest rates was a monetary policy misconduct.

In addition, the number of initial unemployment claims announced on Thursday rose to a new high since October 2024, and the number of renewed unemployment claims also climbed to the highest level since the end of 2021, indicating a cooldown in the employment market. The May PPI data was lower than expected, and the core PPI also showed weakness, indicating limited inflation pressure. The market is increasing its efforts to expect the Federal Reserve to cut interest rates twice this year.

U.S. President Trump once again criticized Fed Chairman Powell on Thursday, calling him a "wooden head" and accusing him of poor interest rate cuts. Trump said high interest rates have led to an increase in federal borrowing costs, spending an additional $600 billion a year.

He stressed that if inflation rises, he can accept interest rate hikes, but now inflation is down and the Fed should take action. Although Trump said he would not fire Powell, he hinted that he might "force something."

3. Protests and riots broke out in many places such as Los Angeles! Trump confronts the governor across the air

Protests against government raids broke out in Los Angeles, California, and have spread toMany places in the United States, including New York, Chicago and Milwaukee.

About 600 people have been arrested in Los Angeles since last weekend, with protesters clashing with law enforcement. A curfew was imposed in downtown Los Angeles, but the situation remains highly tense.

Trump called Los Angeles protesters "thugs" and "foreign enemies", saying that his purpose was to carry out a "foreign invasion" of the United States and said that members of federal agencies would not be allowed to be attacked or cities were conquered.

California Governor Gavin Newsom criticized Trump for mobilizing 700 active-duty Marines and authorizing the deployment of thousands of National Guard soldiers in Los Angeles. He said “democracy is under attack” while Trump claimed on social media that his actions prevented Los Angeles from being “completely burned.”

On Thursday, the federal appeals court blocked a lower court ruling, temporarily retaining Trump's control over the 4,000 California National Guard. Previously, lower court judge Breyer ruled that Trump had mobilized the guards illegally and asked him to return control. The Trump administration appealed quickly and the Ninth Circuit Court of Appeals is scheduled to hold a hearing next Tuesday.

The federal government is further expanding the use of force, and the National Guard supports Immigration and Customs Enforcement to arrest immigrants on the streets. Attorney General Pam Bundy said the government will invoke the Hobbes Act to deal with criminal cases and robbers will face up to 20 years in prison.

4. Israel launched a "Lion's Power" air strike, and Iran launched a retaliation

Israel launched a large-scale military operation against Iran on Friday, June 13, code-named "Operation Lion", with the target of Iran's nuclear facilities, ballistic missile factories and military avatradescn.commanders, with the aim of preventing Iran from developing nuclear weapons. On Friday night, Iran increased its revenge against Israel and carried out multiple rounds of missile bombings. Detonation sounds and air defense alarms sounded in many places in Israel.

A spokesman for the Israeli military said 200 fighter jets participated in the operation and hit more than 100 targets in Iran.

The air strikes killed several military leaders, including senior avatradescn.commander of the Iranian Revolutionary Guard Corps, Hussein Salami, chief of the armed forces' chief of staff, Mohamed Bagherry, and six nuclear scientists. Iran said the air strikes also caused civilian casualties in Tehran's residential areas.

Israeli Prime Minister Netanyahu said Israel is in a "decisive historical moment" and the operation will continue "until the threat is eliminated." Israeli military chief of staff Zamir said tens of thousands of soldiers have been mobilized to deal with a full-scale threat from Iran.

The above content is all about "[Ihua Foreign Exchange Platform]: The war in the Middle East triggered a huge shock in the market! Iranian missile retaliation caused gold and oil to soar, and the Federal Reserve's expectation of interest rate cuts surged." It was carefully avatradescn.compiled and edited by the Avatrade Foreign Exchange editor of Avatrade. I hope it will be helpful to your transactions! Thanks for the support!

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