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Dollar Dives as Fed Concerns Boost Global Risk Appetite | 26th June, 2025

Dollar Dives on Fed Fears On June 26, 2025, markets react sharply to growing concerns over the Federal Reserve’s independence, sending the US Dollar to its lowest levels in over three years. This dollar weakness lifts major currencies and risk assets across the board. Gold (XAU/USD) rises toward recent highs as the USD continues to decline. GBP/USD breaks above 1.3700, marking multi-year highs amid broad sterling strength. In the Asia-Pacific region, AUD/JPY steadies around 94.50, supported by risk appetite and technical support. EUR/JPY trades near 169.50, just shy of its 11-month peak, as European and Japanese policy divergence widens. Meanwhile, China’s NDRC reassures markets with confidence in minimizing external shocks, further bolstering sentiment. Gold Price Forecast (XAU/USD) Current Price and Context Gold (XAU/USD) edges higher near $3,360 as the US Dollar sinks to its lowest level in over three years. Concerns about the Federal Reserve’s independence amid rising political pressures have triggered widespread dollar selling, offering strong support to non-yielding assets like gold. Treasury yields remain stable, allowing bullion to benefit from renewed safe-haven demand and currency-driven momentum. Key Drivers Geopolitical Risks: Global stability remains intact, but political pressure on the Fed introduces uncertainty, prompting investors to seek refuge in gold. US Economic Data: Soft housing and retail figures continue to weaken USD sentiment. Upcoming PCE inflation will be critical for short-term gold direction. FOMC Outcome: The Fed’s credibility is now in focus. Traders fear compromised autonomy, fueling doubts about monetary policy consistency. Trade Policy: Global trade conditions remain stable, but a weaker dollar improves gold’s relative appeal across major markets. Monetary Policy: Expectations for policy easing in late 2025 remain intact; however, market focus shifts to Fed governance risks rather than timing alone. Technical Outlook Trend: Bullish short-term; continuation above $3,350 signals upside bias. Resistance: $3,375, followed by $3,400 and $3,434. Support: $3,345, then $3,322 and $3,300. Forecast: Gold may test $3,375–$3,400 if USD pressure persists. A break below $3,345 would signal near-term consolidation.are-up may offer support. Sentiment and Catalysts Market Sentiment: Bullish; traders highlight gold’s strength amid political and monetary instability in the US. Catalysts: US PCE inflation, Fed commentary, bond market movement, and political developments affecting Fed autonomy. Sterling Forecast (GBP/USD) Current Price and Context GBP/USD trades above 1.3700, marking fresh multi-year highs as the US Dollar extends its slide. The pair gains strong upward momentum on the back of broad dollar weakness triggered by political pressure concerns surrounding the Federal Reserve. With market sentiment improving and the UK maintaining stable economic fundamentals, sterling remains one of the top performers among major currencies. Key Drivers Geopolitical Risks: No major geopolitical headwinds from the UK; global attention is focused on Fed independence concerns, which weaken the USD and support GBP. US Economic Data: Soft US macro releases and anticipation of subdued PCE inflation continue to pressure the dollar and support GBP/USD upside. FOMC Outcome: Concerns over the Fed’s autonomy reduce confidence in future policy stability, widening divergence in favor of the pound. Trade Policy: Trade remains neutral, with no UK-specific tensions disrupting the pair. The USD’s structural sell-off dominates movement. Monetary Policy: The Bank of England maintains a steady rate outlook, with inflation trending gradually lower, giving GBP strength relative to uncertain Fed policy. Technical Outlook Trend: Bullish continuation; breaks above multi-year resistance. Resistance: 1.3740, then 1.3860 and 1.3900. Support: 1.3650, followed by 1.3600 and 1.3520. Forecast: GBP/USD may extend toward 1.3860 if dollar weakness continues. A retracement below 1.3650 would signal consolidation. Sentiment and Catalysts Market Sentiment: Bullish; sterling is widely viewed as a stable alternative to the increasingly volatile USD. Catalysts: US data (GDP, PCE), Fed commentary, UK retail and housing figures, and general risk sentiment in FX markets. AUD/JPY Forecast Current Price and Context AUD/JPY trades around 94.50, showing resilience as it finds support at its nine-day EMA. The pair holds firm amid improved global risk sentiment following reassurance from China’s NDRC and the broader weakness in the Japanese Yen. Despite softer Australian CPI data, the Aussie remains well-supported by risk-on flows and stable commodity demand Key Drivers Geopolitical Risks: Middle East tensions remain subdued, and China’s commitment to minimizing external shocks has lifted Asia-Pacific risk sentiment. US Economic Data: Weaker US data and Fed credibility concerns indirectly boost AUD through dollar weakness and increased carry trade activity. FOMC Outcome: Fears over Fed independence reduce USD appeal, favoring higher-yielding currencies like the Aussie in cross pairs. Trade Policy: Steady trade outlook between Australia and China continues to support demand for the Aussie, particularly in a low-volatility environment. Monetary Policy: RBA remains neutral after soft CPI data. In contrast, the BoJ’s ultra-loose policy keeps JPY under pressure, supporting AUD/JPY upside. Technical Outlook Trend: Sideways to bullish; holding above key short-term moving average. Resistance: 94.85, then 95.20 and 96.00. Support: 94.20, followed by 93.80 and 93.30. Forecast: A close above 94.85 could trigger a push toward 95.20+. Loss of 94.20 may shift short-term trend to consolidation mode. Sentiment and Catalysts Market Sentiment: Moderately bullish; traders favor risk-sensitive pairs like AUD/JPY amid supportive global macro signals and JPY softness. Catalysts: Chinese PMI data, Australian trade balance, BoJ commentary, and global risk flows. EUR/JPY Forecast Current Price and Context EUR/JPY trades near 169.50, hovering just below its 11-month high as bullish momentum continues. The euro remains supported by resilient Eurozone data and divergence in monetary policy, while the Japanese Yen stays pressured due to the Bank of Japan’s persistent dovish stance. Broader risk appetite and fading geopolitical tensions further fuel upside in the pair. Key Drivers Geopolitical Risks: Market stability post-Middle East ceasefire and China’s reassurance reduces risk aversion, favoring yield-seeking flows into euro crosses. US Economic Data: Traders await Q1 GDP USD weakness indirectly supports euro demand. Lower US yields and dollar concerns also keep the JPY underperforming. FOMC Outcome: Fed independence fears weigh on USD and reinforce the EUR’s appeal by comparison. The BoJ remains committed to ultra-loose policy. Trade Policy: Global trade outlook remains stable. Europe’s export-driven strength, combined with a weak yen, boosts the euro’s advantage in the cross. Monetary Policy: ECB’s relatively firmer stance vs. BoJ’s dovishness maintains strong rate differentials in favor of EUR/JPY. Technical Outlook Trend: Bullish continuation; approaching resistance from July 2023 highs. Resistance: 169.80, then 170.30 and 171.50. Support: 168.80, followed by 168.10 and 167.40. Forecast: EUR/JPY may attempt a breakout above 170.00 if momentum holds. A pullback below 168.80 could indicate short-term exhaustion. Sentiment and Catalysts Market Sentiment: Bullish; EUR/JPY remains in favor due to clear rate divergence and persistent yen weakness. Catalysts: Eurozone CPI, BoJ statements, ECB commentary, and global risk sentiment shifts. USD/INR Forecast Current Price and Context USD/INR opened higher on June 26, trading near 83.45, as political pressure on the US Federal Reserve batters the dollar across global markets. Despite broad USD weakness, the Indian Rupee comes under pressure due to persistent oil import costs and slight capital outflows. The pair remains volatile, with the dollar’s trajectory largely dependent on Fed-related headlines and broader risk sentiment. Key Drivers Geopolitical Risks: Trump’s criticism of the Fed raises alarm over institutional independence, rattling investor confidence in the USD and fueling volatility in emerging market FX. US Economic Data: Weak US macro data, including sluggish housing and retail figures, continue to pressure the dollar. Traders await PCE inflation for direction. FOMC Outcome: Markets are now pricing in the risk of delayed or politically influenced Fed decisions, weakening USD sentiment across the board. India-Specific Factors: Despite global dollar weakness, INR struggles with ongoing oil-related pressures and cautious foreign investor behavior. Monetary Policy: The RBI maintains a neutral stance, but may face pressure to act if inflation rises. Fed uncertainty clouds the near-term outlook for USD/INR. Technical Outlook Trend: Sideways to bullish; recovering from recent lows. Resistance: 83.60, then 83.80 and 84.00. Support: 83.20, followed by 82.95 and 82.60. Forecast: USD/INR may retest 83.60–83.80 if USD stabilizes. A break below 83.20 would indicate a resumption of broader bearish momentum. Sentiment and Catalysts Market Sentiment: Cautious to bullish for USD/INR as traders balance dollar weakness with local INR pressures. Catalysts: US PCE inflation, Fed commentary, crude oil prices, and RBI policy signals. Wrap-up As June 26 unfolds, the sinking US Dollar drives a surge in global currencies and commodities. Market participants respond to rising concerns about the Federal Reserve’s independence, prompting safe-haven flows into gold and pushing GBP/USD and EUR/JPY to multi-year highs. AUD/JPY holds firm, benefiting from technical support and optimism on China’s economic direction. With the Fed in focus, traders now await comments from US policymakers and key inflation data to gauge whether dollar weakness will deepen or stabilize. Ready to trade global markets with confidence? Join Moneta Markets today and unlock 1000+ instruments, ultra-fast execution, ECN spreads from 0.0 pips, and more! Start now with Moneta Markets!

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Publication date:

2025-06-26 07:13:53 (GMT)

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