Week Ahead: Oil Shock Fears, PMI Pulse, and Powell in the Hot Seat
Week Ahead: Oil Shock Fears, PMI Pulse, and Powell in the Hot Seat
Geopolitical Overhang: Strait-of-Hormuz Risk Moves the Needle
A weekend of U.S.–Israeli strikes on Iranian nuclear facilities has thrust the Strait of Hormuz back onto every trader’s dashboard. Roughly one-fifth of the world’s crude passes through this 39-kilometre chokepoint, and Tehran is again hinting it could halt shipping. Goldman Sachs warns that even a 50 % flow reduction lasting a single month could spike Brent to $110/bbl before a gradual retreat to the mid-90s later in the year.
Early Monday dealing captured the anxiety: Brent briefly leapt more than 3 % to five-month highs near $81.40, while WTI topped $78.40 before paring gains. A sustained blockade remains unlikely—closing the strait would also cripple Iran’s own export revenue—but the risk skew is unmistakably topside for energy and headline-sensitive FX crosses.
Fed in the Spotlight: Powell’s Semi-Annual Testimony
Stateside, Chair Jerome Powell delivers his semi-annual Monetary Policy Report to the Senate Banking Committee on Tuesday (24 Jun) and to the House on Wednesday. Lawmakers will probe whether last week’s Iran strike complicates the Fed’s “two-cut-this-year” baseline by stoking fresh energy-led inflation. The official Fed calendar confirms the hearings and a crowded roster of six additional FOMC speakers through Friday.
Markets currently price only a 16 % chance of a July cut but a 70 % probability by September. Any hint that Powell shares Governor Waller’s newfound openness to an earlier move would be dollar-negative. Conversely, testimony that emphasises “meaningful further progress” before easing could deepen the greenback’s bid.
U.S. Macro Deluge: From Housing to Core-PCE
Data flow accelerates as the week progresses. Existing-home sales kick things off Monday, followed by new-home sales Wednesday. The flash S&P Global PMIs drop today and will calibrate how tariffs, higher oil and tighter financial conditions are feeding through to business sentiment.
Thursday is the macro “big bang”:
Q1 GDP (final) – consensus 2.4 % q/q rebound after last quarter’s mild contraction.
Durable Goods Orders – expected -6.3 % m/m, but even a smaller drop could reinforce resilience.
Friday brings the Fed’s preferred inflation gauge, Core PCE, seen easing to 2.5 % YoY in May. A downside miss would embolden doves, while another upside print would argue for policy patience. Supplementary releases on personal income, spending and University of Michigan sentiment round out the picture.
Euro-Area: Flash PMIs & Lagarde’s Testimony
The euro zone posts its HCOB flash PMIs this morning. Forecasts imply manufacturing at 49.8 and services at 50.0, barely straddling the contraction line. President Christine Lagarde testifies before the European Parliament at 13:00 GMT, where she must square last month’s seventh consecutive rate cut with still-sticky core inflation near 2 %.
United Kingdom: Bailey & PMI Divergence
The UK prints its own flash PMIs minutes after the euro zone. Consensus has services at 51.3—modest expansion—but manufacturing mired in the mid-40s. Eight BoE speakers, including Governor Andrew Bailey on Wednesday, could clarify whether June’s dovish dissent was a one-off or the start of a pivot.
Japan & Asia-Pac: Energy Exposure Under Scrutiny
Japan’s yen remains the quintessential Middle East proxy: net-long JPY futures positions exceed 144 k contracts, twice the euro’s. Any flare-up that threatens energy imports should keep USD/JPY bid; the pair already sliced through its daily Ichimoku cloud to trade above 146.80.
Asia’s calendar is busy too:
BoJ Summary of Opinions – Tuesday.
Tokyo CPI, retail sales, unemployment – Thursday/Friday.
Australia May CPI – Wednesday; a hot print could revive RBA hike bets.
FX Roadmap: Dollar Bid, Yen Offered, Commodity FX on the Ropes
DXY – edging higher as safe-haven demand collides with energy-inflation hedging.
USD/JPY – targeting 147.50/148.00 while Middle East tensions linger.
EUR/USD – trapped between massive option expiries from 1.1440–1.1600; PMI beats or misses will determine direction.
AUD/USD – already down 0.75 % Monday; sub-0.6350 looks plausible if risk aversion deepens.
Commodities Corner: Gold Pauses, Oil in Focus
Gold’s traditional hedge appeal is lagging the dollar’s surge; spot has slipped to $3,362/oz despite geopolitical stress. Still, technicians eye $3,348 as first support and $3,424 as near-term resistance.
Oil, by contrast, remains the fulcrum. Brent’s five-month breakout and expanding backwardation threaten to reignite inflation expectations. Should Iran launch even a token drone or missile attack on Gulf shipping, or if U.S. naval escorts prove insufficient, triple-digit crude would become the base case.
Risk Scenarios to Monitor
Iran Retaliation Path – Range from cyber-attacks to commercial-shipping harassment.
Fed Messaging – Hawkish hold vs. pre-emptive reassurance.
PMI Surprise Matrix – Synchronised deterioration could flip equity sentiment sharply risk-off.
Oil Supply Interruption – OPEC spare capacity offsets vs. logistical bottlenecks.
