| The main theme for the Forex market in June were trade wars, though interest rates and outlook for monetary policy also had an impact on various currencies. Additionally, escalating tensions between the United States and Iran were affecting markets, reducing risk appetite among traders. The US dollar ended the month as the weakest major currency. The greenback performed poorly from the very start of June, in part because of surprisingly weak employment growth demonstrated by nonfarm payrolls. Woes of the greenback continued after the Federal Reserve kept interest rates unchanged but sent dovish signals, resulting in expectations of two interest rate cuts this year. The last week of the month was a bit better for the US currency as it seems the threat of trade wars somewhat lessened and Fed officials suggested that expectations of two rate cuts were exaggerated. While the euro rallied at the start of the month after a monetary policy decision from the European Central Bank, it was dragged down by comments from ECB President Mario Draghi, who sounded very dovish and even mentioned a possibility of interest rate cuts. The Great Britain pound was also among the weakest currencies in June due to persisting Brexit fears, specifically whether pro-Brexit candidate Boris Johnson becomes the new leader of the Conservative party and the new prime minister after Theresa May was kicked out from her position. The Japanese yen did not perform well either despite geopolitical tensions in Middle East. The Swiss franc was the only traditional safe currency that performed relatively well in June, mainly due to the US-Iran conflict. The Swissie was vulnerable, though, to the conflict between the European Union and Switzerland itself. Despite geopolitical conflicts, riskier commodity currencies were clear winners in June, most likely due to hopes for a successful resolution of the US-China trade spat. The Canadian dollar got additional support from positive domestic macroeconomic data, which led to speculations that the Bank of Canada will refrain from interest rate cuts, and from prices for crude, which rebounded in June after the huge slump in May. The Australian and New Zealand dollars were not so lucky as their respective central banks were clearly considering rate cuts, but that did not prevent the currencies from joining their Canadian counterpart in a rally. Norway's central bank was an anomaly among mostly dovish central banks of developed nations as it was considering interest rate hikes, not cuts. In fact, it did raise borrowing costs in June, making the Norwegian krone one of the strongest currencies on the Forex market. Gold demonstrated an amazing performance in June, mostly due to the dovish Fed and the US-Iran conflict. |
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