Weekly Preview: CPI, Central Bank Testimonies, Big Bank Earnings

The Euro drifted lower against the US Dollar on Monday, extending its downward momentum following a 0.18% decline for the EUR/USD last week. A sharp contraction in global risk appetite and mounting inflationary pressures fueled the move, driven by a serious weekend escalation in hostilities between the US and Iran. The currency pair traded down toward the 1.1400 handle after facing rejection near 1.1460 on Friday.

Market sentiment soured rapidly at the weekly opening as both Washington and Tehran intensified military actions over the weekend. Following US strikes on Iranian military sites along the southern coast, Tehran retaliated with attacks targeting US bases across the Gulf region. Further complicating the geopolitical landscape, Iran’s Islamic Revolutionary Guard Corps announced the closure of the strategic Strait of Hormuz. Although US Central Command reported that some commercial vessels were successfully escorted through the waterway, the disruption sent crude oil prices surging over 4%, placing severe economic strain on the energy-importing Eurozone.

Market participants are closely watching scheduled commentary from European Central Bank and Federal Reserve officials for immediate policy clues. Later this week, the broader macroeconomic backdrop for the currency cross will be heavily shaped by the release of the US Consumer Price Index data for June, alongside Federal Reserve Chairman Kevin Warsh’s highly anticipated congressional testimony.

Building on last week's performance where Gold dropped by -1.59%, the precious metal started the new week on a distinctly weaker note, reversing its Friday attempt to stabilize above the $4,100 mark. The non-yielding asset slipped below the $4,050 level heading into Monday's European session, leaving it vulnerable to further losses. This downward shift follows a weekend escalation in the Middle East that completely overshadowed Friday's short-lived optimism regarding potential US-Iran diplomacy.

The brief calm evaporated after the US launched a major round of strikes on Iran, drawing retaliatory missile attacks from Tehran on US military bases in the Gulf. Compounding the crisis, Iran’s Islamic Revolutionary Guard Corps fired on another commercial vessel and announced the closure of the strategic Strait of Hormuz. This direct threat to global energy supplies triggered a fresh surge in crude oil prices, effectively dismantling the market's focus on the Fed's less hawkish June meeting minutes and replacing it with renewed fears of energy-driven inflation.

These compounding inflationary risks have heavily reinforced expectations for tighter monetary policy, driving flows directly into the safe-haven US Dollar at the expense of bullion. According to the CME Group's FedWatch Tool, traders are now pricing in a nearly 90% chance of a Fed rate hike by the end of the year, keeping US Treasury bond yields elevated. Markets now remain focused Federal Reserve Chairman Kevin Warsh’s upcoming congressional testimony and the latest US CPI and PPI data.

Oil prices surged in Asian trade on Monday as renewed conflict between the U.S. and Iran stoked fears of severe global supply shocks, especially following Tehran’s declaration that the Strait of Hormuz is closed. Brent Oil Futures for September delivery climbed toward $79.65 per barrel, while West Texas Intermediate (WTI) crude futures pushed up to $74.98 per barrel. The aggressive opening rally follows a strong prior week for energy commodities, highlighted by a 4.09% increase for WTI oil last week as hostilities initially reignited.

The latest spike was triggered by Iran expanding its drone and missile attacks to Gulf states over the weekend in response to U.S. military operations, alongside targeting a commercial vessel within the strategic waterway. While U.S. President Donald Trump publicly disputed Tehran's claims by asserting that shipping lanes remain open under American protection, regional maritime traffic slowed dramatically over the weekend.

Because the Strait of Hormuz serves as the vital transit point for crude exported by Saudi Arabia, Iraq, Kuwait, and the UAE, any prolonged closure threatens to force global refiners to seek costly alternative supplies while driving freight and insurance premiums higher. Consequently, market participants are keeping a close watch for potential emergency responses, including coordinated production adjustments from major oil producers or strategic petroleum reserve releases.

U.S. stock index futures deepened their losses early Monday as the escalating military conflict between the U.S. and Iran rattled investor sentiment, overshadowing the positive momentum that had pushed Wall Street indexes higher at Friday's close. S&P 500 Futures and Dow Jones Futures both trended lower, but the tech-heavy Nasdaq 100 Futures suffered the sharpest decline. The downturn followed a weekend of intense geopolitical friction, with U.S. Central Command and Iranian forces exchanging strikes and issuing conflicting statements regarding the closure of the strategic Strait of Hormuz. The resulting surge in crude oil prices has reignited Wall Street's fears of energy-driven inflation, which could pressure the Federal Reserve into maintaining a more hawkish monetary policy stance in the coming months.

Technology shares face particularly heavy selling pressure as a severe rout in major Asian semiconductor stocks appears poised to spill over into domestic trading. Market participants are engaging in profit-taking amid persistent anxieties over elevated artificial intelligence valuations. Highlighting this sector-specific stress, South Korea's SK Hynix saw its shares plunge in overseas trading, completely reversing the enthusiasm from its strong Nasdaq debut on Friday.

Beyond tech, the broader U.S. corporate landscape faces a critical test as the second-quarter earnings season officially begins. Wall Street's focus is rapidly shifting toward the financial health of the banking sector, with banking heavyweights JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, and Citigroup all scheduled to report their quarterly results on Tuesday.