Investors remain uncertain about the specific details of the memorandum of understanding between the US and Iran. However, they seem to be confident enough to push July WTI to a new two-month low, while August Brent has reached three-month lows. Softer oil prices are contributing to a reduction in interest rates, while peripheral European benchmark 10-year yields have reached three-month lows. The 10-year US Treasury yield has decreased by twelve basis points since Monday, June 8. Most G10 and emerging market currencies are showing strength today. As anticipated, the Bank of Japan has increased its overnight rate to 1% and plans to cease tapering its bond purchases by next April, maintaining them at approximately JPY2 trillion (~$12.5 billion) per month. The market appears to be positioning itself for another hike later this year. The dollar has maintained its position above JPY160 thus far today. The Reserve Bank of Australia maintained its policy rate at 4.35%. The market currently reflects approximately a 50% probability of an additional hike being factored in for the fourth quarter. Chile’s central bank convenes later today and is anticipated to uphold its overnight target rate at 4.5%.

Following the euro’s increase to approximately $1.1620 yesterday, the upward momentum has transitioned into a phase of consolidation. The market seems to be in a holding pattern, anticipating further information regarding the US-Iran agreement, and has likely adopted a more cautious stance ahead of the upcoming FOMC meeting results tomorrow. The euro experienced a decline to $1.1575 during the Asia Pacific session but made a recovery to nearly $1.1615 in the European morning. The intraday momentum indicators are currently extended, and there are 1.25 billion euros worth of options at $1.16 set to expire today. The Bank of Japan’s widely anticipated 25 bp rate hike did not elicit a strong response from the dollar. The dollar has maintained its position above JPY160 today and continues to operate within the range established last Thursday (approximately JPY159.60-JPY160.60). Last Thursday, and again yesterday, the dollar approached and maintained a position above the 20-day moving average (~JPY159.75 today). It has maintained its position above that level since May 14.

Sterling reached a peak of approximately $1.3460 during the Asia Pacific trading session yesterday. It experienced a decline to a low around $1.3415 during the North American morning session, but primarily remained stable below $1.3445. After spending the majority of the session above the 20-day moving average (~$1.3420), it was unable to close above this level. It has not surpassed that level in three weeks. Sterling experienced a decline to $1.3390 before the European session today rebounded to approximately $1.3425 during the European morning. The intraday momentum indicators are currently extended in anticipation of the North American market opening. Nearly GBP470 million in options at $1.34 are set to expire today. The Canadian dollar experienced a slight increase leading up to the pre-weekend high; however, it continued to show weakness in North America.

The US dollar experienced a decline, reaching nearly CAD1.3950 during late Asia-Pacific trading yesterday, before rebounding to approach CAD1.3995 in North America. It reached nearly CAD1.4020 earlier today. Recall that last week, the greenback reached a new peak for the year close to CAD1.4025. It is identifying support in Europe around CAD1.40. The Australian dollar increased past last week’s peak yesterday, approaching $0.7090. After initially reaching $0.7090 during early Asia Pacific trading yesterday, it revisited that level in North America. The session low near $0.7040 was recorded following the RBA’s widely anticipated decision to maintain its current policy stance. It rebounded to approximately $0.7070 in Europe, which extended the intraday momentum indicators.