General Market Analysis – 20/06/25

Stocks Fall as Conflict Drags on

Global stocks fell in trading yesterday as the Middle East conflict continued with little sign that a ceasefire is imminent. US markets were closed yesterday but are expected to open on the back foot today as President Trump advised that he will make a call on whether to strike at Iran within two weeks. FX markets were open as usual, and the dollar remained bid in recent ranges, the DXY up 0.1% to 98.85, and moves were relatively limited in both the pound and the franc after the Bank of England kept rates on hold and the Swiss National Bank cut by 25 basis points as expected. Oil prices leapt again, with Brent hitting its highest close since January 22, Brent closing up 2.80% at $78.85 and WTI finishing up 0.88% at $75.80. Gold experienced a dip earlier in the day but ultimately closed close to flat, up just 0.04% at $3,370.23.

Central Banks Stuck Between a Rock and a Hard Place

We have seen some major central banks making rate calls this week, and the resounding theme seems to be of concern on the geopolitical front that leaves them in a bit of an uncomfortable spot. In general, central banks like to make moves on solid data, and US tariffs—and now the conflict in the Middle East—have thrown a few spanners in the works as the uncertainty of where markets and economies will be in a few months’ time weighs on decision makers. The Federal Reserve, the Bank of England and the Bank of Japan all kept rates on hold this week, citing uncertainty in the coming months, whilst the Swiss National Bank and the Norwegian Central Bank cut rates. The issue for FX traders is that while the central banks are indicating uncertainty, the usual interest rate differentials that longer-term trend traders look for are not easy to call, and that will probably lead to more volatility—not less—in the coming months.

Busy Trading Day to End the Week

Traders are anticipating a busy trading day to close out the week today, with a good mix of data due out as well as major geopolitical updates expected out of the Middle East and the US. The Asian session will have a strong focus on Chinese markets early in the day, with the PBOC due to update the market on its latest Loan Prime Rates, with the 1-year and 5-year expected to remain at 3.00% and 3.50% respectively. Later in the day, we are due to hear from Bank of Japan Governor Kazuo Ueda when he speaks in Tokyo, and yen traders are expecting volatility in the currency. The early focus in Europe will be on UK markets, with the Retail Sales data due out (exp -0.5% m/m), before attention jumps across the Atlantic for the return of US traders and the Canadian Retail Sales numbers (exp +0.4% m/m) and Core Retail Sales numbers (exp -0.2% m/m). However, most market participants are still expecting updates from the Middle East and on trade to have a bigger impact on sentiment in the last sessions of the day.

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