The Fed is expected to retain a hawkish stance through much of the third quarter due to persistent inflation, even if near-term rate hikes pause.

Markets are eyeing UK CPI and BoE expectations, alongside Gulf-related supply risk that could influence energy-driven inflation and currency flows.

Commentary from MUFG and Commonwealth Bank suggested rate hikes may start later but the magnitude remains uncertain.

The yen hovered near 162.36 per dollar, flirting with four-decade highs as the dollar is set for a weekly gain, underscoring ongoing intervention risk in the currency markets.

Analysts highlighted uncertainty and potential market impact from varied views by figures such as Watanabe, Edwards, Morrison, and Malek.

Inflation concerns eased by influential voices and Fed officials, though labor data continues to reshape rate-hike expectations.

Markets have adjusted expectations for Fed rate increases in response to shifting labor market signals and ongoing inflation debates.

UK political uncertainty and potential finance minister decisions have kept sterling volatile, with implied volatility around elevated levels.

A meaningful policy shift would hinge on a dovish tilt from Williams and firmer CPI data, or a Gulf de-escalation that eases Brent prices and the Fed’s hawkish calculus.

Oil prices slid while U.S.-Iran tensions linger, yet overall markets were mixed and currencies largely rangebound, with energy prices and inflation still shaped by the gulf and geopolitics.

Major currencies showed modest moves: the euro around $1.143, the pound near $1.341, while the Australian dollar and kiwi posted mixed moves amid broad macro updates.

Attention is turning to the FOMC minutes for clues on the future policy path and rate guidance, with expectations that Powell’s stance on forward guidance could limit how informative the minutes are.