Weekly Focus – Rate Hikes Coming from the Big Central Banks - Forex | PriceONN
Last week’s optimism on a reopening of the Strait of Hormuz faded this week as both US and Iran officials toned down the prospect of agreement and military action flared up again, including in Lebanon. The oil price is back above USD 97 for Brent. In our new economic forecasts published this week, we have […] The post Weekly Focus – Rate Hikes Coming from the Big Central Banks appeared first on ActionForex.

When Diplomacy Stalls, Oil Speaks First

Just one week can flip the entire mood of a market. The cautious hope that the Strait of Hormuz might reopen smoothly has quietly evaporated, and the price chart tells the story before any official statement does.

Both Washington and Tehran walked back the idea that a deal was close, and fresh military flare-ups, including activity in Lebanon, reminded traders how fragile the situation really is. The result? Brent crude has pushed back above USD 97.

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Our latest set of economic forecasts, released this week, leans on a slow and steady normalisation of oil prices stretched across several years, broadly matching what the futures curve already implies. In plain terms, that assumes shipments gradually claw their way through the Strait without a genuine resolution landing anytime soon. The risks, of course, cut in both directions.

America Runs Hot Across the Board

The US numbers leaned firmly positive. The ISM survey flagged rising manufacturing output and stronger hiring, job openings beat expectations, and the unofficial ADP reading clocked 122,000 private sector jobs added in May. Yet the figure that actually moves desks lands on Friday: the official employment report.

Underneath the data, technology keeps doing the heavy lifting. Tech-related investment continues to power the broader economy, and that strength is mirrored in equities, where tech names refuse to cool off.

Trade policy added another twist. The US Treasury wrapped up its Section 301 investigation covering 60 economies on forced labour, clearing a path to replace the existing 10% tariffs once they lapse on 24 July. Expect courtroom challenges to follow. Here lies an overlooked detail: net tariff revenue is currently sitting close to zero, because incoming receipts are being canceled out by refunds on duties already ruled illegal. That quietly makes US fiscal policy looser than policymakers intended, and it feeds directly into our view that the Fed's next move will be a hike rather than a cut.

Europe's Uncomfortable Squeeze

Across the Atlantic, the picture is messier. Euro area inflation climbed to 3.2% y/y in May, right in line with forecasts, but the detail that should unsettle the ECB is services inflation jumping to 3.5% from 3.0%. That acceleration runs hotter than calendar quirks like the timing of Easter can justify.

The dismal first read on May services PMI was revised meaningfully higher, yet the headline of 48.5 still signals contraction. So the central bank faces a textbook bind: growth is softening while prices push upward, both tangled up in oil sitting above the bank's March assumptions.

The ECB has telegraphed a 25bp hike at next week's meeting alongside refreshed projections. Whether a further increase follows, and when, stays open, and clear guidance is unlikely to arrive.

A Global Tightening Wave

The hawkish baton then passes around the world. At the Fed, Kevin Warsh chairs his first press conference, having voiced doubts about signaling tools like the dot plot of FOMC member projections, which is due for an update at this very meeting. Bets on an autumn hike keep building.

We also look for the Bank of Japan to lift its policy rate to 1%, a level unseen since 1995. Board hawks have grown louder, and real wage growth has finally turned positive.

What Smart Money Is Watching

For traders, the through-line is energy bleeding into rate expectations. Brent back above USD 97 is not just an oil story; it is reshaping how every major central bank frames the inflation fight.

Keep these connections on the radar:

  • USD/JPY: a BoJ move to 1% could squeeze a long-standing carry trade, especially if US yields wobble around Friday's jobs print.
  • EUR: the ECB's growth-versus-inflation dilemma leaves the single currency vulnerable to whichever side of the data surprises next.
  • Gold and bond yields: a synchronized hiking cycle pressures both, yet stubborn oil-driven inflation can keep safe-haven demand alive.
  • Energy equities and inflation-linked assets: these stand to benefit if Hormuz risk lingers.

    The opportunity sits in the gap between a weakening euro area and a US economy still running on tech-fueled momentum. The risk? A single headline out of the Strait can reprice the entire curve overnight. Position accordingly, and watch Friday closely. Note that the next Weekly Focus arrives on 19 June.

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