Currency & Energy Market Weekly Review

Global financial and energy markets remained highly volatile this week as investors tracked central bank policy expectations alongside escalating geopolitical developments.

US Dollar Holds Firm

The US Dollar Index (DXY) closed at 101.45, posting a modest 0.01% daily gain and a 0.68% weekly advance, supported by expectations that the Federal Reserve will maintain a cautious stance on monetary policy.

According to the latest market pricing, investors expect the Fed to keep interest rates unchanged in the near term, although the possibility of additional rate hikes later this year remains if inflation proves persistent. Morgan Stanley believes easing inflation could allow the Fed to maintain the current 3.50%–3.75% policy rate range through the remainder of 2026, while sticky inflation could reopen the door for further tightening.

Japanese Yen in Focus

The Bank of Japan (BOJ) is widely expected to leave its policy rate unchanged at 1.0% during its upcoming July meeting. Policymakers continue to assess the impact of previous rate increases while monitoring inflation, energy prices, and domestic economic growth.

Stronger performance from AI-related industries and improving economic conditions may encourage the BOJ to revise its FY2026 GDP growth outlook higher, although an immediate rate hike appears unlikely.

Crude Oil Sees Strong Weekly Rally

Crude oil prices eased in the final trading session of the week, with WTI Crude falling 1.87% and Brent Crude declining 1.53%. Despite the late-week correction, both benchmarks recorded impressive weekly gains, with WTI rising 10.63% and Brent advancing 5.36%, marking a third consecutive week of gains.

The rally was driven by renewed geopolitical tensions between the United States and Iran, continued disruptions to Red Sea shipping routes, and concerns over crude supplies through the Strait of Hormuz. However, prices retreated after reports suggested diplomatic efforts to restart US-Iran negotiations could resume.

Outlook

The US dollar is expected to remain supported by evolving Federal Reserve expectations, while crude oil is likely to stay highly volatile as geopolitical developments continue to influence global supply risks.

Going forward, investors will closely monitor central bank decisions, inflation trends, and developments in the Middle East, which are expected to remain the primary drivers of both currency and energy markets.