June 13, 2025

“Israel’s strikes on Iran this morning were not unexpected, but they arrived much faster and much harder than the market was prepared for. Risk appetite has slumped as a result, and the safe havens are the outperformers ahead of US consumer sentiment data today.”

Sam Cornford – Head of Trading

 

USD

The dollar sank to three-year lows yesterday as fresh tariff panic triggered another wave of dollar outflows. The main subject this morning, however, is the Israeli airstrikes on Iranian nuclear facilities overnight that have prompted a surge in safe haven assets and hurt stocks and risk-sensitive FX. Interestingly, the dollar is also trading like a haven again and has received a modest boost that is likely linked to the near-15% jump in oil prices that we have seen this month. The Antipodes have been the worst hit by the flight to safety, with AUD and NZD both down almost 1% today. Israel have already said that these strikes will not be the last, so there is a material risk that this becomes a more prolonged period of market nerves.

Another worry for markets will be Trump’s fresh threats against Fed independence, after he called Powell a ‘numbskull’ and said that he might ‘have to force something’ if he does not deliver a cut. The next meeting is on Wednesday, but before that we get some consumer sentiment data today and retail sales on Tuesday.

 

GBP

Unsurprisingly, the spike in geopolitical tension has added to sterling’s difficult week against the euro. A drop in risk appetite can now be added to a shock drop in jobs in May and a worse-than-expected GDP contraction in April to push GBP/EUR 1% lower since Monday. The only data of note today is the BoE’s 1Y consumer inflation expectations survey, but the main focus for sterling now will be the double header of CPI inflation and the June BoE decision on Wednesday and Thursday next week.

 

EUR

The euro climbed to its highest level since late 2021 yesterday afternoon, briefly breaking through the 1.16 level as the usual tariff themes hurt the dollar. We are trading more than half a percent lower now, though, after an initial pullback accelerated with the spike in energy prices overnight. Geopolitical shocks are not usually kind to the euro, especially with the energy price crisis and the EUR/USD parity episode back in 2022. That said, it is still in a very strong position and remains in the 1.15-1.16 range. Data today includes a trade balance report and some final revisions to the May CPI figures for France and Spain.

 

Markets

Oil’s 10% rally this week and the geopolitical volatility in the Middle East have hit stocks hard overnight, with stock index futures across the US and Europe all down by 1-2% this morning.

 

Main Economic Events (All Times CET)

11:00am: Eurozone Trade Balance
4:00pm: US UoM Consumer Sentiment

 

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