June 20, 2025

“A touch of optimism for a diplomatic solution in the Middle East has trimmed the dollar’s gains, but it is still set to end the week higher for the first time this month. The next big data points come in the form of the PMIs on Tuesday for the UK, US, and eurozone.”

Tim Hallinan – Trading Director

USD

Trump’s two-week opening for diplomacy with Iran led to some modest relief in markets yesterday, and the dollar weakened off again. Though near impossible to guess the US president’s next move, his statements that Iran is looking to negotiate and that he would be deciding on a strike over the coming weeks window shaved some of the geopolitical risk priced into markets. Ministers from the UK, France, and Germany meet the Iranian foreign minister in Geneva today and are likely to push hard for a diplomatic solution. The only data we get today are the Philadelphia Fed survey and the Leading Index – markets will likely be looking at developments in the Middle East and Monday’s PMIs.

GBP

The Bank of England rate hold was a relatively quiet event for sterling. The vote split was more dovish than expected, with three of the nine MPC members calling for a rate cut, and there was a lot of commentary on the loosening in the labour market and the uncertainty ahead. But some element of extra dovishness had already been priced into the pound as the data printed weaker over the past couple of weeks. An 80% probability is being priced in for a cut in August, and another is expected by the November meeting. Retail sales data this morning has also helped to confirm that the economic momentum from Q1 has been lost – they fell 2.7% month-on-month in May.

EUR

The euro has climbed 0.6% from yesterday’s low as the dollar’s oil-geopolitical premium has declined overnight. The main event today is a consumer confidence print this afternoon, where the consensus is looking for a marginal improvement on May’s figure. It is the USD leg driving EURUSD for now and, until the eurozone PMIs on Monday, the domestic data is likely to have little bearing. Elsewhere in Europe, the Norges Bank delivered a surprise 25bp rate cut that caught the markets off guard and triggered an initial 1.5% jump in EURNOK. Ignoring the special case of Japan, Norway is the last G10 central bank to begin its cutting cycle, after delaying its first cut for almost a year.

Markets

Trump’s delay to his decision on striking Iran came too late to help pull European stocks out of the red yesterday, but pre-market trading is looking towards a rebound this morning. US equities remain relatively subdued, after falling 0.3% yesterday.

Main Economic Events (All Times CET)

8:00am: UK Retail Sales
2:30pm: Canada Retail Sales
4:00pm: Eurozone Consumer Confidence

To learn more about Ballinger Group, please visit our website or our LinkedIn page.