Markets maintain optimistic outlook

On Friday, June 19, the Swiss Foreign Ministry announced that the planned technical and follow-up discussions had been delayed. JD Vance also withdrew from his trip. This created a bit of confusion. Nevertheless, diplomatic initiatives continued throughout the weekend. The involved parties (the US, Iran, Pakistan, and Qatar) decided to move forward, and delegations gathered in Switzerland. Nevertheless, the global financial markets maintain an optimistic outlook, believing that the talks are not entirely abandoned and that outstanding issues may soon be addressed. Consequently, oil prices have remained stable in light of the cancelled meetings, driven by hopes that both parties will meet again once these issues are resolved. However, a return to pre-war oil price levels appears unlikely in the near term unless there is substantial evidence of normalcy in shipping routes and a reversion of insurance costs to standard levels. The 10-year US Treasury yield initially declined in response to optimism surrounding the talks, as the market anticipated that further drops in energy prices could alleviate inflationary pressures. However, the yield subsequently rebounded following the announcement of the meeting’s cancellation. Persisting inflationary pressures are further complicating the scenario, hindering any respite for US Treasury yields. It is also apparent that developments in the Gulf region are exerting significant influence on the economies of various countries, hindering the efforts to alleviate inflation. In my previous analysis, I highlighted the potential for an interest rate hike by the Bank of Japan. In accordance with expectations, the Bank of Japan indeed raised its interest rate, resulting in the Japanese yen surpassing the targeted threshold of 161. 20, reaching two-year highs. Japanese authorities have been actively defending the 160 levels through verbal interventions. In 2026, the Bank of Japan officially recognised only one intervention from April 28 to May 27, during which the Ministry of Finance reportedly spent nearly JPY 11. 5 trillion. During the G7 meeting, the Japanese finance minister reaffirmed his commitment to defending the Yen against prevailing market expectations, suggesting that mere verbal interventions, such as monitoring market trends will not be enough. The market is unlikely to adhere to continued verbal reassurances unless tangible actions are taken by the authorities. Similarly, the British Pound has experienced a decline amid perceptions that the Bank of England may not implement rate hikes in the near future and may maintain its current interest rates, despite UK retail sales data exceeding expectations. This stronger data, however, has only contributed to the depreciation of the Pound, also known as Cable (GBP). GOLD Last week, I emphasized the need to take a cautious stance on gold unless it exceeds $4440. Although it saw a significant increase, it failed to break past $4382 before declining again. The decrease in oil prices didn’t assist gold in recovering at the same rate. The primary factors influencing this are less aggressive purchasing of gold by the central banks and a liquidity crisis. The strength of the US dollar, alongside the Fed’s dot plot suggesting potential rate hikes later this year, has reversed the trend. Gold had seen some gains due to expectations of US interest rate cuts. The Bank of Japan’s interest rate hike has also narrowed the interest rate differential, making it less attractive to borrow US dollars against the Japanese yen. However, the BOJ’s interest rate hike has made borrowing of USD against Japanese currency more expensive and less appealing. Additionally, this week, gold experienced heightened selling pressure following the Fed’s hawkish comments on Wednesday, signalling a shift towards a more likely interest rate hike. Consequently, gold has struggled to gain momentum and has declined. As the weekend approached, gold prices also fell as optimism regarding developments in Switzerland waned. The ongoing US-Iran conflict and the potential for talks are certainly influencing gold prices. I believe the future movement of gold will largely hinge on inflation levels, liquidity, central bank purchasing interest, and the speed and stability of peace in the Middle East and its sustainability. Therefore, the potential for gold to rise will solely rely on these factors. Ongoing issues and unresolved tensions between the US and Iran will hinder gold’s ability to reclaim its former strength. However, a resolution could push gold prices toward the higher end of the given range or even above. This suggests that in the upcoming weeks or months, gold may trade within a broader range, fluctuating between $3800 and $4520. WEEKLY OUTLOOK #GOLD @ $4160- In the meantime, the ongoing uncertainty surrounding the peace talks will keep gold prices fluctuating in both directions. It is anticipated to trade within a broader range this week. Key support levels to monitor are $4040 and $3950. On the upside, a decisive break above $4258 could lead to a rise towards $4335. #EURO @ 1. 1469- The Euro might weaken slightly, but as long as it stays above 1. 1350, it is likely to rebound. However, if it doesn’t rise above 1. 1580, it may continue to face pressure. #GBP @ 1. 3234- Pound Sterling has seen a decline in its appeal, yet the support level at 1. 3110 remains robust and is expected to make a recovery. To reach 1. 3418, a breakout above 1. 3360 is necessary. However, if it falls below the support level, there is a risk of dropping to 1. 3050. #JPY @ 161. 31- The market faces the challenge of rising above the 162. 50 mark to reach 163. 30. On the other hand, a decline below 159. 90 will speed up the fall towards 158. 80 and 156. 80. Copyright Business Recorder, 2026

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