Weekly Market Briefing - 26th June 2026

Markets were shaped this week by a mix of central bank expectations, inflation data, falling energy prices, geopolitical developments, and renewed currency volatility.

The US Dollar remained broadly supported as investors continued to price the possibility of further Federal Reserve tightening, although softer oil prices and in-line inflation data reduced some of the most aggressive rate-hike expectations by Friday.

Geopolitically, markets focused on progress in the US-Iran peace framework and the reopening of flows through the Strait of Hormuz, although late-week tensions reminded investors that energy-supply risk has not fully disappeared. 

In the UK, political uncertainty following Keir Starmer’s resignation added another risk factor, although sterling remained relatively resilient against the Euro.

Data/Figures

Federal Reserve - USD

The US Dollar remained firm overall, supported by expectations that the Federal Reserve could still raise rates later this year. 

US PCE inflation rose to 4.1% year-on-year in May, with core PCE at 3.4%, keeping inflation well above the Fed’s target. However, the data was broadly in line with expectations, and the sharp decline in oil prices helped the Dollar ease slightly toward the end of the week. 

COT positioning supports the view that the Dollar remained favoured. The latest CFTC data showed non-commercial traders in USD Index futures holding around 21k long versus 2.3k short contracts, leaving a net long position of approximately +18.7k. This suggests speculative accounts remained broadly constructive on the Dollar, even though net length softened slightly from the previous week.  

Market Impact: Supported overall by rate expectations and relative economic resilience, but Friday’s softer tone suggests some profit-taking after a strong run.

Bank of Japan - JPY

The Yen remained under pressure despite the Bank of Japan’s recent rate hike to around 1.00%. USD/JPY stayed near intervention-sensitive levels, with the Yen trading close to its weakest levels in decades. 

The BoJ’s move was significant, but Japanese rates remain far below US rates, meaning the Yen is still exposed to carry-trade pressure.

The Yen continues to struggle because the market is still focused on the wide US-Japan rate gap and the risk that imported energy costs may continue to weigh on Japan’s external position.

COT positioning supports the weak-Yen narrative. The latest data showed non-commercial Yen futures positions at around 72.8k longs versus 151.2k shorts, leaving a net short position of approximately -78.3k. This shows that speculative accounts remain heavily positioned against the Yen, although the net short position improved slightly from the previous week as some short covering took place.

Market Impact: Weak, intervention-sensitive, and still heavily shorted by speculative accounts despite the BoJ’s rate hike. 

Bank of England - GBP

GBP/USD remained under pressure this week from broader Dollar strength, but Sterling performed better against the Euro, with GBP/EUR heading for its best weekly performance since mid-May. 

Markets appeared to look through some of the immediate political uncertainty following Keir Starmer’s resignation, helped by signs that the leadership transition may remain orderly. 

The Bank of England held the Bank Rate at 3.75%, but the vote split showed that some policymakers still favour tighter policy. At the same time, UK services activity weakened, with the services PMI falling further.

This makes the BoE’s position more complicated: inflation remains a concern, but weaker growth limits the case for aggressive tightening. 

COT positioning shows that sterling sentiment remains fragile. The latest data showed non-commercial Pound futures positions at around 13.1k longs versus 162.5k shorts, leaving a net short position of approximately -149.4k. This indicates that Asset Manager positions remain heavily bearish on Sterling, even though the Pound was able to outperform the Euro during the week. 

Market Impact: GBP is resilient versus the Euro, softer versus the Dollar, and still vulnerable to political and fiscal headlines. 

European Central Bank - EUR

The Euro came under pressure earlier in the week as EUR/USD fell to a one-year low before recovering slightly as the Dollar softened into Friday. 

The ECB’s recent rate hike continues to support the Euro from an interest-rate outlook, lower energy prices helped reduce inflation fears, but they also reduced the need for the ECB to tighten more aggressively.

COT positioning shows that the Euro remains net long, but with softer momentum. The latest data showed non-commercial Euro futures positions at around 247.3k longs versus 217.2k shorts, leaving a net long position of approximately +30.2k. However, net positioning became slightly less long over the week, as short positions increased faster than long positions. 

Market Impact: EUR remains supported by ECB tightening, but vulnerable to weak growth data and stronger relative Dollar demand. 

Currency Market Summary

The Dollar was the main outperformer through most of the week, although it softened slightly into Friday, the Dollar index remained on track for a weekly gain, helped by expectations that the Fed may still need to tighten further. As for USD/JPY, it remained one of the main pairs in focus with the Yen trading close to levels that could trigger intervention concern. EUR/USD fell to a one-year low earlier in the week before recovering modestly. GBP/USD remained pressured by Dollar strength, but GBP/EUR performed well, with Sterling set for its best week against the Euro in over five weeks.

Overall, the Dollar remains favoured, the Yen and Pound remain heavily shorted, and the Euro remains net long but with weaker momentum.

What to Watch Next Week

Markets will be watching several high-impact releases and events next week:

• US Non-Farm Payrolls: Released Thursday due to the US Independence Day holiday. This will be the key data point for Fed rate expectations.

• US Labour Market Data: JOLTS, ADP employment, weekly jobless claims, and Challenger job cuts will help show whether the labour market is cooling or still resilient.

• US ISM Manufacturing PMI: Important for assessing whether US manufacturing momentum is holding up.

• Eurozone CPI: A key test for ECB expectations, especially after the recent fall in energy prices.

• Japan Tankan Survey: Important for assessing Japanese corporate sentiment after the BoJ’s rate hike.

• Strait of Hormuz / US-Iran Developments: Energy markets remain sensitive to shipping flows, peace-deal progress, and any further escalation.

• UK Political Transition: Markets will watch the next steps in the Labour leadership transition and any signs of future fiscal policy direction.

• The next OPEC+ Monthly meeting is scheduled for July 5th which will provide further insight into the oil situation.

Summary

Market sentiment improved slightly as lower oil prices reduced fears of a prolonged energy-driven inflation shock. Inflation is still above target in major economies, central banks remain cautious, and geopolitical risk around the Strait of Hormuz continues to influence energy prices, yields, and currencies. 

The US Dollar remains supported by rate expectations and relative economic resilience, while the Yen remains the weakest major currency theme due to low relative yields and heavy speculative short positioning.  The Sterling has shown resilience against the Euro, but UK politics, weak services activity, and bearish positioning remain risks. The Euro remains supported by ECB tightening, but weak growth data and softer momentum leave it vulnerable. 

Looking ahead, next week’s US labour data, Eurozone inflation figures, central bank commentary, and Middle East developments are likely to drive the next major market moves.