The major story of the session was the collapse of the Israel-Hamas ceasefire, with the office of Israeli Prime Minister Benjamin Netanyahu confirming that "extensive strikes" had been launched on Gaza following Hamas' continued refusal to release hostages and rejection of mediator proposals.
Adding to the geopolitical risk, reports surfaced that U.S. forces had sunk an Iranian intelligence-gathering vessel, though as of posting, these remain unconfirmed. I suspect that given the time that has passed, these reports are incorrect.
Oil saw a modest lift during the session, while gold surged to yet another record high, briefly trading above US$3,007, as escalating tensions fueled demand for safe-haven assets.
In FX, major currencies responded in a muted fashion. A broad bid for the USD weighed on EUR, AUD, NZD, CAD, and GBP. USD/JPY and USD/CHF remained firm, indicating no significant flight to traditional safe-haven currencies. USD/JPY climbed (just) back above 149.50, reflecting ongoing yen weakness.
Japan’s Finance Minister Katsunobu Kato addressed the jump in JGB yields, reiterating that bond markets will be left to determine pricing but warning that intervention remains an option if needed. His comments echoed BOJ Governor Kazuo Ueda’s previous messaging.
As a side note, the Bank of Japan meets Tuesday and Wednesday (Japan time), with markets overwhelmingly expecting no policy change, given mounting risks from the ongoing global tariff trade war.
On the central bank front, Reserve Bank of Australia Assistant Governor Sarah Hunter, speaking in Sydney, underscored that the RBA will be cautious—slower than market pricing suggests—when it comes to rate cuts. She also emphasized that the focus remains on U.S. policy settings and their impact on Australian inflation.
This article was written by Eamonn Sheridan at www.forexlive.com. Read More Details
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