FOMC Statement, US Jobless Claims, US Housing Starts

The EUR/USD pair dropped more than 0.60% on Tuesday as the US Dollar (USD) finds support from its safe-haven appeal amid escalating geopolitical tensions between Israel and Iran. The conflict appears to be intensifying, with reports indicating the White House is weighing its potential involvement.

Market sentiment took a decisive negative turn after US President Trump demanded Iran's “unconditional surrender” in a post on his social media platform, driving further USD demand.

According to CNN, officials close to the matter suggested that President Trump is stepping back from diplomatic efforts and is now considering military action targeting Iran’s nuclear infrastructure.

While geopolitical developments dominate headlines, macroeconomic data also influenced market direction. In the US, Retail Sales fell for a second consecutive month, declining by 0.9% month-on-month in May—below expectations of a 0.7% drop—driven largely by weaker auto sales. Annually, sales rose 3.3%, slowing from April's 5% increase. Meanwhile, US Industrial Production contracted by 0.2% MoM, missing forecasts for a 0.1% gain. This marks the second contraction in three months, signaling persistent softness in the manufacturing sector.

In contrast, Eurozone economic data offered a more upbeat tone. German ZEW sentiment indicators exceeded expectations, supported by stronger investment and resilient consumer demand.

Looking ahead, all eyes are on the US Federal Reserve’s upcoming monetary policy meeting, While markets widely expect the Fed to hold rates steady, attention will be focused on the updated Summary of Economic Projections (SEP) and Fed Chair Jerome Powell’s press conference for clues on the policy path forward.

Gold prices edged lower on Tuesday, dipping below the $3,400 mark as renewed US Dollar (USD) strength weighed on the precious metal, despite a deteriorating risk environment.

While heightened geopolitical risks typically support gold due to its safe-haven appeal, the greenback’s broad rebound is tempering bullion demand.

Market sentiment remains fragile amid escalating conflict between Israel and Iran. On Monday, US President Donald Trump abruptly left the G7 summit in Canada following urgent developments in the Middle East. In a stark message posted on his social media platform, Trump urged: “Everyone should immediately evacuate Tehran,” reinforcing concerns over a potential escalation.

From a macroeconomic standpoint, recent US data has shown signs of weakness. Markets are now keenly watching the Federal Reserve’s two-day policy meeting, which concludes Wednesday.

Gold's trajectory in the near term will likely be shaped by a tug-of-war between rising geopolitical risk and dollar-driven headwinds. While conflict in the Middle East supports demand for safe-haven assets, persistent USD strength and the Fed’s policy stance could continue to limit gains for the yellow metal.

Oil prices surged on Tuesday as escalating tensions between Iran and Israel reignited geopolitical risk in global energy markets. While major oil and gas infrastructure remains largely intact, the growing intensity of military strikes and potential threats to vital supply routes are driving investor concern.

Although there has been no significant disruption to oil flows so far, Iran has partially suspended gas production at the South Pars field—shared with Qatar—following an Israeli strike that ignited a fire at the site over the weekend. Additionally, Israel reportedly targeted Iran’s Shahran oil depot, raising fears of further supply-side escalation.

Tensions have also drawn attention to the Strait of Hormuz, a critical artery for global oil shipments. A collision involving two oil tankers near the strait—amid reports of increased electronic interference—underscored the potential vulnerability of the route.

Despite the geopolitical backdrop, supply levels appear stable, and demand expectations are softening. The International Energy Agency (IEA), in its monthly oil report released Tuesday, lowered its global oil demand growth forecast by 20,000 barrels per day.

In addition to geopolitical developments, oil traders are closely watching central bank policy meetings this week. The US Federal Open Market Committee (FOMC) is expected to announce its interest rate decision later Tuesday, which could further influence commodity prices and market sentiment.

US equities closed sharply lower on Tuesday, as investors weighed weaker-than-expected retail sales data and growing fears that the ongoing Israel–Iran conflict could draw in the United States. Risk sentiment was further strained after reports emerged suggesting President Donald Trump is considering direct military action against Tehran.

Geopolitical concerns intensified following a report from The Wall Street Journal indicating President Trump convened a high-level meeting with advisers in the White House Situation Room to consider potential US military strikes on Iran.

US retail sales fell more than forecast in May, adding to concerns about consumer resilience. The Federal Reserve’s two-day policy meeting began Tuesday, with no change in interest rates widely anticipated. However, markets are focused on the Fed’s updated Summary of Economic Projections and Chair Jerome Powell’s press conference, which may offer fresh signals about the rate path through 2025.

Cooling inflation and mixed data have led investors to expect a more dovish stance, though any hint of hawkishness in the Fed’s "dot plot" could spur renewed market volatility.

In corporate news, Amazon announced that this year’s Prime Day will run for four days (July 8–11), doubling the duration of last year’s sales event. "Our members told us they need more time to shop the deals," said Jamil Ghani, VP of Worldwide Prime at Amazon.