Major global currencies including the British Pound Sterling, Japanese Yen, and Australian Dollar experienced notable weakness against the US Dollar on Tuesday, as markets braced for the upcoming release of US Consumer Price Index (CPI) data and reacted to heightened geopolitical tensions in the Middle East [1][2][3].
The British Pound Sterling (GBP/USD) briefly rallied from just below 1.3350 to above 1.3400 following a stronger-than-expected British Retail Consortium (BRC) report, which showed like-for-like retail sales up 3.4% year-over-year in May, significantly above the 0.6% consensus and reversing April's 3.4% decline [1]. However, this rally was short-lived, with the pair quickly retreating below the 200-day Exponential Moving Average (EMA) and ending the day weaker, as markets remained unconvinced that the data would influence Bank of England (BoE) policy. The BoE's policy rate stands at 3.75%, with markets expecting no change at the June 18 decision, leaving Sterling vulnerable to US Dollar movements [1].
The Japanese Yen (USD/JPY) also weakened, with the pair reaching a session high just shy of 160.50, its strongest level since the late April spike that triggered a record intervention by Japanese authorities [2]. Despite the Bank of Japan (BoJ) being widely expected to hike its policy rate to 1.00% at its June 15-16 meeting, the highest in three decades, the Yen failed to rally. The market has largely dismissed verbal warnings from Japanese officials and remains focused on the wide interest rate differential with the US Federal Reserve, which sits at 3.50%-3.75% and is not expected to cut rates this year [2].
The Australian Dollar (AUD/USD) tested a six-week low of 0.7005, trading down 0.25% on the day, as risk sentiment soured following US President Trump's announcement of retaliatory strikes against Iran after a helicopter was downed in the Strait of Hormuz [3]. Oil prices ended the session lower, with WTI down nearly 3%, while the US Dollar Index (DXY) finished almost flat [3]. In Australia, consumer sentiment declined in June due to inflation and rising gasoline costs, and NAB economists no longer expect further Reserve Bank of Australia (RBA) rate hikes this year, seeing the cash rate peaking at 4.35% [3].
Across all markets, attention is focused on the release of US CPI data for May, scheduled for Wednesday at 12:30 GMT. Consensus expectations are for a 0.5% month-over-month increase and a year-over-year rate accelerating to 4.2% from 3.8%, the fastest in roughly three years, with core CPI seen at 2.9% year-over-year [1][2][3]. The anticipated acceleration is attributed mainly to higher energy prices linked to Middle East tensions. A hotter-than-expected CPI print is expected to strengthen the US Dollar further, while a softer core reading could provide temporary relief for other currencies [1][2][3].
CONCLUSION
Global currency markets are under pressure ahead of key US inflation data, with the US Dollar strengthening against the Pound, Yen, and Aussie Dollar amid geopolitical uncertainty and expectations of persistent US rate differentials. Market participants are closely watching the upcoming US CPI release, which is likely to set the tone for currency movements and central bank policy expectations in the near term.