A light week with Geopolitical trends in the spotlight

Last week’s review

The past week was marked by a wave of central bank activity across both advanced and emerging economies, as policymakers responded to slowing growth and shifting inflation dynamics. Nonetheless, we should not overlook geopolitical tensions, particularly the Iran-Israel conflict in the Middle East, and the reactions of other countries to this rapidly evolving situation. Uncertainty is high in teh market and any change there can affect the markets.

In the United States, economic data reflected a gradual cooling. Retail sales fell by 0.9% in May, with weakness concentrated in discretionary categories. The core CPI rose just 0.1% month-over-month, suggesting easing inflationary pressure. The Federal Reserve kept its policy rate steady at 4.25%–4.50% and signaled two rate cuts are expected by year-end. However, it also revised projections to show slower growth and higher unemployment through 2025–2026. Industrial production fell for the third time in five months, while housing starts dropped nearly 10% in May. Overall, signs point to a softening economy, with the Fed likely to remain cautious as it monitors inflation and trade policy effects.

In the United Kingdom, the Bank of England also held rates at 4.25%, though three members supported a cut. Inflation declined to 3.4% in May, and the broader economic outlook remains weak. PMI data showed stagnation in services (50.2) and contraction in manufacturing (46.4), reinforcing the expectation of a rate cut in August if inflation and wage growth continue to moderate.

In the Eurozone, inflation neared the ECB’s 2% target, prompting the central bank to cut its deposit rate to 2.00%, beginning what may be a slow easing cycle. However, economic momentum remains soft. The services PMI fell below 50, and manufacturing continued to stagnate. The ECB forecasts just 0.8%–1.0% GDP growth in 2025, raising stagflation concerns if energy prices climb due to geopolitical risks.

Elsewhere in Europe, the Swiss National Bank cut rates by 25 basis points to 0.00% in response to deflation (-0.1% CPI YoY), though it was cautious about further easing. Sweden’s Riksbank also cut rates by 25 basis points to 2.00%, citing softening inflation and growth, with another potential cut later in 2025.

China showed mixed economic performance. Q1 GDP held at 5.4% YoY, fueled by public investment, but underlying demand remains fragile. Retail sales rose 6.4% in May, supported by subsidies, while industrial production (5.8%) and fixed asset investment (3.7%) underwhelmed. The property sector continues to struggle, and May’s CPI fell 0.1% YoY, adding pressure on the People’s Bank of China to deliver further stimulus. Growth is forecast to slow to 4.7% in 2025 and 4.0% in 2026.

In Japan, modest stabilization was evident. Manufacturing PMI improved to 49.4, though still below the growth threshold. The BoJ held its policy rate at 0.50% and slowed the pace of bond tapering. Governor Ueda cited uncertainty over trade and inflation expectations. While a rate hike in October is possible, the central bank is expected to remain cautious for the rest of the year.

Among emerging markets, geopolitical risks and a strong U.S. dollar pose challenges. Brazil raised its policy rate to 15.00%, likely ending its tightening cycle. Chile kept rates at 5.00%, while the Philippines cut to 5.25%. Türkiye held its rate at 46%, with the World Bank upgrading its 2025 growth outlook to 3.1%.

U.S. Economic Outlook – A quiet week ahead with lots of Speeches!

The upcoming week will be pivotal for U.S. markets as investors focus on key economic data, the housing sector, and Federal Reserve guidance. Several major indicators will offer fresh insights into the pace of economic cooling and the trajectory of monetary policy.

On Monday, S&P Global’s flash PMIs for June are expected to show moderate expansion to near 52, suggesting early signs of stabilization in both manufacturing and services. However, May’s existing home sales are forecast to decline, reflecting the ongoing drag from high mortgage rates and weakened affordability. New home sales data due Thursday are also expected to show a dip, reinforcing concerns about a broader slowdown in real estate.

On Tuesday, attention will shift to Consumer Confidence and Fed Chair Jerome Powell’s testimony before Congress. His remarks will be closely watched for signals on inflation and the Fed’s outlook for rate cuts, especially as markets anticipate two reductions later in 2025.

Personal Income and Spending on Friday will be the key market drivers in the US. Consumer strength remains under scrutiny amid mixed signals. May retail sales hinted at weaker spending, particularly in autos and restaurants, though core goods consumption held steady. For May, personal spending is forecast to rise just 0.1%, with real spending declining 0.1% after adjusting for inflation. Despite this soft patch, income growth remains solid—April saw a strong 0.8% increase, driven partly by higher Social Security payments. Households still appear to have capacity to spend, but upcoming data will be key in determining whether

Other data points include durable goods orders on Thursday, where a sharp gain is expected due to a spike in aircraft purchases, though core orders will likely remain weak.

Broader themes include ongoing geopolitical tensions in the Middle East pushing oil prices near $80, stoking concerns over imported inflation. Recent data — including a 0.9% drop in May retail sales, falling housing starts, and the 15th straight monthly decline in the Leading Economic Index (LEI) — all point to a gradual economic slowdown.

While income growth remains firm and consumers still have spending capacity, caution is rising. Powell’s tone on Tuesday could shape market expectations going into the third quarter. With economic risks mounting and volatility likely, investors will remain focused on whether the U.S. is headed for a soft landing or a deeper downturn.

Wall Street & U.S. Dollar Outlook – Final Week of June 2025

Wall Street heads into the final week of June trading cautiously, with the S&P 500 hovering about 2.7% below its February highs. Investors remain on edge as they navigate mixed economic data, uncertain Federal Reserve guidance, and heightened geopolitical tensions—particularly in the Middle East, where ongoing conflict between Israel and Iran has kept Crude oil prices elevated near $80 per barrel, adding to inflationary pressure.

Markets are now focused on Fed Chair Jerome Powell’s testimony to Congress on Tuesday, which could clarify whether the Fed maintains its forecast for two rate cuts in 2025 or shifts to a more conservative stance. Meanwhile, corporate earnings will draw additional scrutiny, with companies like Nike, FedEx, Tesla, Carnival, and Micron set to report. Strategists recommend a defensive approach, especially as valuations remain stretched, with the S&P 500’s forward P/E near 22x.

While fundamentally, analysts expect summer trading to be volatile—with the market susceptible to earnings surprises, Fed commentary, and global developments—technically, the S&P 500 appears overbought and is moving within a critical trading zone between 5,800 and 6,100. Any breakout above or below this range could confirm the next directional move.

If the index breaks above 6,100, the next targets are 6,150 and then 6,300. On the flip side, a break below 5,800 would open the door to the 5,670 and 5,500 levels.

In currency markets, the U.S. dollar continues to show strength. The Dollar Index (DXY) is up nearly 0.9% recently and trades near 99, supported by safe-haven demand and hawkish Fed language. Rising geopolitical risks and inflation concerns have boosted dollar inflows, especially against emerging market and commodity-linked currencies.

Despite long-term bearish sentiment, underscored by low fund manager exposure, the dollar is expected to stay firm this week—unless geopolitical tensions ease and risk appetite returns.

Technically, the 101 and 98 levels remain key support and resistance zones, defining the recent range in which the DXY is attempting to determine its next trend. The overall downtrend, with the RSI around 44, appears to be losing momentum. However, bullish tendencies also seem weak, as reflected by a flat On-Balance Volume (OBV) on the daily timeframe. A decisive break above or below these key levels could provide the next clear directional signal.

Eurozone Economic Outlook – Week 26, 2025

The eurozone enters the final week of June under the shadow of weak economic momentum, industrial stagnation, and geopolitical uncertainty, all of which are complicating the European Central Bank’s (ECB) policy path. Key indicators this week, especially the June flash PMIs, will offer insight into the region’s trajectory as it heads into the second half of the year.

In May, the manufacturing PMI edged up to 49.4, supported by fiscal stimulus expectations in Germany and rising defense spending. However, the services PMI fell to 49.7, signaling subdued demand amid tariff-related uncertainty. For June, forecasters anticipate modest gains, with manufacturing rising to 49.8 and services returning to the neutral 50.0 mark. Such readings would suggest economic stabilization and reinforce the case for a measured pace of further monetary easing.

Industrial production remains under pressure, contracting by 2.4% in April, while export demand continues to suffer from trade tensions. Meanwhile, inflation has fallen below 2.0%, driven by weaker services prices, reinforcing expectations for additional rate cuts.

Following its June 5 rate cut to 2.0%, the ECB is expected to remain accommodative. Officials, including Governor Villeroy and Board Member Panetta, signaled openness to further easing in the coming months, taking a flexible, data-dependent approach.

The European Commission forecasts GDP growth of just 0.9% in 2025, with domestic demand struggling to offset weak exports. Southern Europe, however, shows relative resilience due to EU support and fiscal prudence. The euro has strengthened modestly, lowering import costs, but geopolitical tensions and elevated oil prices still pose upside inflation risks.

Overall, the eurozone economy remains fragile. This week’s PMI data will be critical in determining whether the region is stabilizing—or slipping further into stagnation.

As fundamental data are not in favor of the European common currency, technical charts and indicators also suggest that the long-term uptrend may have peaked, and a correction could be underway. On the H4 chart, the RSI stands at 53, indicating weakening momentum, while OBV shows low and uncertain buying interest among traders—both signaling a potential move below the 1.15 level.

If the correction deepens, the next support levels to watch are 1.143 and 1.138. A break below these levels could open the path toward the 1.12 area. On the upside, initial resistance lies at 1.155. A breakout above that level would pave the way for a move toward 1.16 and the recent high around 1.165.

Gold Economic Outlook – Week Ahead

Gold prices are expected to remain relatively stable this week, supported by ongoing geopolitical tensions and steady central bank demand. However, upward momentum may be limited by a strong U.S. dollar and continued uncertainty surrounding the Federal Reserve’s interest rate outlook.

The Fed’s recent decision to keep rates unchanged, alongside projections for only two rate cuts in 2025, has weighed on gold’s short-term appeal by keeping yields elevated and reducing demand for the non-yielding metal. That said, the Fed’s cautious tone and mixed U.S. data still leave room for potential gains—particularly if inflation cools further or economic growth slows more sharply.

Geopolitical risks, especially tensions in the Middle East, continue to bolster gold’s safe-haven status. Any disruption to global trade routes, such as through the Strait of Hormuz, could drive prices higher in the short term.

Central banks remain a reliable pillar of demand. According to the World Gold Council, 95% of global central banks plan to increase their gold reserves in the near future, citing ongoing economic and geopolitical uncertainty. Meanwhile, gold-backed ETFs and digital gold products have also seen renewed investor interest.

Technically, gold remains in a bullish structure but is largely range-bound between $3,350 and $3,400, with initial resistance around $3,375. A breakout above this zone could pave the way toward new heights. However, in the absence of a clear catalyst, consolidation is likely to persist.

On the downside, a break below $3,300—coupled with a weakening RSI around 47 and declining buy volume (as shown by OBV on the H4 chart)—could signal a short-term correction. This bearish scenario may play out before any renewed rally toward $3,400 and potentially $4,000 in the medium term.

Oil Market Review and Outlook – Week Ahead

Oil prices rose last week, largely driven by escalating geopolitical tensions in the Middle East. Israeli airstrikes on Iran heightened concerns over potential disruptions to oil shipments through the Strait of Hormuz, pushing Brent crude above $74 per barrel. Although these events introduced volatility, global supply fundamentals remain robust, indicating a well-supplied market.

According to the International Energy Agency (IEA), global oil supply exceeded demand in May, with inventories rising as both OPEC+ and non-OPEC producers increased output. U.S. production also remains elevated, though a gradual slowdown is anticipated as drilling activity begins to moderate.

Historically, geopolitical shocks—particularly in the Middle East—tend to trigger temporary price spikes, typically lasting four to six months before markets adjust. Currently, Brent crude is trading between $77 and $80, while WTI remains in the mid-$70s.

Key Market Drivers

Geopolitical Tensions

The Israel–Iran conflict remains the primary risk factor. While a full-scale disruption of the Strait of Hormuz is unlikely, even limited interruptions could drive Brent toward $90. A major escalation could push prices above $100.

Supply and Inventories

Global supply rose by approximately 330,000 barrels per day in May. Inventory builds, especially in non-OECD countries, and the easing of OPEC+ cuts are contributing to strong supply buffers.

Demand Outlook

Demand remains soft, particularly in the U.S. and China. The IEA forecasts global demand growth of 720,000 barrels per day in 2025, slightly lower than previous estimates.

U.S. Production Trends

U.S. crude output peaked at 13.5 million barrels per day in Q2 2025 and is expected to decline modestly to 13.3 million by late 2026.

Outlook for the Week Ahead

WTI is expected to trade within a $72 to $74 per barrel range. Geopolitical risk will likely keep prices elevated, but a move above $75 would likely require a significant escalation. Conversely, easing tensions could bring prices back toward the mid-$70s.

While geopolitical tensions are keeping prices supported, increasing global supply and weaker economic growth expectations—evident in recent forecasts from the BoE, ECB, and Fed—could neutralize some of the upward pressure on oil in the weeks ahead.

Bitcoin Market Review and Outlook – Week Ahead

Bitcoin is currently trading in the $103,000–$104,000 range, after reaching an intraday high of approximately $106,450 and a low near $102,600. The broader cryptocurrency market has seen slight declines over the past week, primarily influenced by global macroeconomic pressures and rising geopolitical uncertainty.

Investor sentiment remains cautious as markets digest the U.S. Federal Reserve’s recent “hawkish pause.” With interest rates expected to stay elevated for an extended period, investor appetite for high-risk assets like Bitcoin has softened. Meanwhile, persistent tensions in the Middle East continue to weigh on market confidence and contribute to broader risk aversion.

On-chain data shows that around 15,000 BTC held by short-term investors were sold at a loss this week—often a signal of capitulation and a potential price bottom.

Institutional interest in Bitcoin remains resilient. Spot Bitcoin ETFs have continued to attract inflows, while traditional financial institutions are gradually expanding their exposure. Growing optimism around future regulatory clarity in the U.S. also supports the long-term outlook for Bitcoin.

Looking ahead, Bitcoin is expected to remain within a consolidation range between $100,000 and $106,500. Major catalysts—such as macroeconomic data releases, Federal Reserve statements, or geopolitical developments—could trigger directional moves. Traders should also watch for volatility around options expiries and key technical levels.

Technically, Bitcoin is hovering just above its 50-day exponential moving average (EMA), currently around $101,440. A firm break below this level could initiate a deeper pullback toward the $100,000–$97,000 support zone. Conversely, a breakout above the $106,500 resistance level could pave the way toward $109,000 and potentially $112,000 or higher.