On June 17th, despite the announced agreement between the US and Iran to reopen the Strait of Hormuz, European Central Bank Chief Economist Philip Lane warned on Tuesday that inflationary pressures stemming from the Middle East conflict have not yet fully transmitted through the economy, and the ECB must be prepared for inflation to remain above target for some time.

In a media interview, Lane stated that the persistently high energy prices over the past four months have built up effects in the inflation transmission chain, making it likely that the Eurozone's inflation rate will stay above 3% in the coming months. "We have been able to see from the transmission process that inflation will be above 3% for a period ahead," Lane said. "The impact of rising energy prices is not only on energy itself but will gradually pass through to food, goods, and service prices, continuing to affect inflation performance this year and next."

Furthermore, according to a survey, respondents widely expect the Federal Reserve to leave interest rates unchanged at this meeting and to take no action until 2027. A total of 32 economists, fund managers, and market strategists participated in the survey, which anticipates the Fed will remove the "easing bias" language from this week's policy statement, which previously suggested the next move was more likely to be a rate cut. However, due to Trump's tariff policies and the Iran war pushing inflation higher, rate cuts are currently off the short-term agenda. EY Chief Economist Gregory Daco commented, "While markets generally view [Fed Chair] Warsh as dovish, he is inheriting a committee that has clearly become more hawkish. Several policymakers have recently indicated that rate hikes should remain a policy option if inflation persists above target, and inflationary pressures from energy prices further reinforce this tendency."

Key data to watch today includes the UK's May CPI annual rate, the UK's May Retail Price Index annual rate, the UK's May unadjusted Input PPI annual rate, the Eurozone's May Harmonized CPI annual rate, the US May Retail Sales monthly rate, and the US May Pending Home Sales Index monthly rate. Additionally, the Federal Reserve's latest interest rate decision early tomorrow morning requires close attention.

US Dollar Index

The US Dollar Index consolidated with slight losses yesterday, currently trading around 99.50. The easing of Middle East tensions, which dampened safe-haven demand for the dollar, was the main factor pressuring the index lower. Additionally, market expectations for the Federal Reserve to hold rates steady in June also exerted some downward pressure. However, the overall positive US economic data released during the session limited the currency's decline. Today, focus is on resistance near 100.00, with support around 99.00.

EUR/USD

The Euro consolidated with slight gains yesterday, currently trading around 1.1610. The US Dollar Index weakening due to reduced safe-haven demand as Middle East tensions eased was the primary factor supporting the Euro's rise. Furthermore, continued market digestion of hawkish remarks from ECB officials also provided some underlying support. Today, focus is on resistance near 1.1700, with support around 1.1500.

GBP/USD

The British Pound consolidated with slight gains yesterday, currently trading around 1.3430. The US Dollar Index weakening due to cooling safe-haven demand and expectations for the Fed to hold steady this week was the main reason supporting the Pound's gain. However, diminished expectations for a Bank of England rate hike limited the currency pair's upside. Today, focus is on resistance near 1.3500, with support around 1.3350.