The euro rose in European trade on Tuesday against a basket of major rivals, expanding the gains for the fourth straight session against the dollar and approaching a four-year peak as the risk appetite improved in the markets with the US dollar dropping after an Israel-Iran ceasefire agreement. 

The odds of an ECB interest rate cut in July also dropped as investors await more clues on the path ahead of European policy easing in the second half of the year.

The Price

The EUR/USD price rose 0.35% today to $1.1614, with a session-low at $1.1574.

The euro closed up 0.5% on Monday, the third profit in a row, approaching a four-year peak at $1.1631.

Ceasefire 

US President Donald Trump announced a ceasefire agreement between Iran and Israel, to get into effect in a few hours.

The deal, reached with Qatari help and US coordination, stipulates an Iranian ceasefire first, followed by Israel in 12 hours, then the announcement of the end of the 12-day war in 24 hours.

Trump lauded the agreement which avoided a war that would’ve destroyed the Middle East.

US Dollar

The dollar index fell 0.3% on Tuesday away from a four-week high at 99.42 against a basket of major rivals.

The dollar fell as the risk appetite improved in most global markets following the Iran-Israel ceasefire.

Later today, Fed Chair Jerome Powell is scheduled to testify ahead of the House of Parliament in Washington.

European Rates

ECB President Christine Lagarde hinted at the possible end of the current cycle of policy easing, which was in response to a combined shock such as the Covid 19 pandemic, the Ukrainian war, and the energy crisis.

According to a Reuters source, most ECB members now aim at holding interest rates unchanged in July, with the global markets now expecting just an additional 25 basis points of rate cuts by the end of the year. 

The odds of a 0.25% ECB rate cut in July now stood below 30%, with traders awaiting more eurozone data and remarks by ECB officials to gather more clues. 

The yen gained ground in Asian trade on Tuesday on track for the first profit in four days against the dollar and moving away from recent six-week lows.

The dollar is expanding its losses in the forex market as the risk appetite rebounded after US President Donald Trump’s announcement of a ceasefire between Israel and Iran.

The cautious Bank of Japan’s policy meeting last week also hurt the odds of normalizing the monetary policy and hiking interest rates in July, as traders now await more data from the world’s third largest economy.

The Price

The USD/JPY price fell 0.6% today to 145.29, with a session-high at 146.17.

The yen lost 0.1% on Monday against the greenback, hitting a six-week trough at 148.03 amid mounting geopolitical tensions back then.

Ceasefire 

US President Donald Trump announced a ceasefire agreement between Iran and Israel, to get into effect in a few hours.

The deal, reached with Qatari help and US coordination, stipulates an Iranian ceasefire first, followed by Israel in 12 hours, then the announcement of the end of the 12-day war in 24 hours.

Trump lauded the agreement which avoided a war that would’ve destroyed the Middle East.

US Dollar

The dollar index fell 0.3% on Tuesday away from a four-week high at 99.42 against a basket of major rivals.

The dollar fell as the risk appetite improved in most global markets following the Iran-Israel ceasefire.

Later today, Fed Chair Jerome Powell is scheduled to testify ahead of the House of Parliament in Washington.

Japanese Rates

The odds of a Bank of Japan 0.25% interest rate hike in July is still below 40%.

Now investors await more inflation, unemployment, and wages data from Japan.

U.S. stock indices rose on Monday as investors closely watched for Iran’s response to the recent airstrikes targeting its nuclear facilities.

Heavy U.S. bombers struck nuclear sites in Fordow, Isfahan, and Natanz, coinciding with diplomatic efforts aimed at de-escalation and achieving a ceasefire between Tehran and Israel.

These moves followed President Donald Trump's Friday statement that he would decide within two weeks on how to respond to Iran.

Markets are increasingly concerned about the possibility of an Iranian military escalation, including potential attacks on U.S. bases or attempts to close the Strait of Hormuz.

As of 16:20 GMT, major indices showed gains:

• The Dow Jones Industrial Average rose 0.3% (up 114 points) to 42,321

• The S&P 500 climbed 0.5% (up 31 points) to 5,998

• The Nasdaq Composite increased 0.6% (up 121 points) to 19,568

Aluminum prices rose on Monday to their highest level in three months following U.S. airstrikes on Iranian nuclear facilities, sparking fears of rising energy costs and potential disruptions to metal shipments from the Middle East.

Energy accounts for 40% to 45% of the cost of aluminum smelting in some regions globally.

Investor concerns over an escalation in Middle East conflict and potential disruptions to oil and gas supply grew after U.S. President Donald Trump warned that the U.S. might target additional sites unless a peace agreement is reached with Israel.

By 09:16 GMT, benchmark aluminum was up 0.5% at $2,561 per metric ton, after touching a high of $2,654.50, its strongest level since March 21.

Alistair Munro, senior base metals analyst at brokerage Marex, said:
“Middle Eastern countries account for about 9% of global aluminum output. If the Strait of Hormuz is shut down, it could impact aluminum shipments.”

Analysts added that global supply could face more disruption if Iran closes the Strait, since Middle Eastern production relies heavily on imported raw materials like bauxite and alumina.

Copper Market Under Scrutiny on London Metals Exchange (LME)

In other metals markets, attention turned to the significant holding of cash copper contracts and warrants (ownership documents) on the LME, along with a sharp price backwardation between short- and long-term contracts.

LME data shows that a single company controls over 90% of cash copper and warrants.

The spread between cash copper and the three-month contract hit $274 per ton on Friday — the highest since October 2022 — up from just $3 a month ago.

Part of this squeeze is attributed to declining copper inventories at LME warehouses, after large volumes were shipped to the U.S. following President Trump’s order to investigate possible tariffs on copper imports, which drove U.S. prices higher.

The LME responded Friday by imposing limits on large short positions.

Other Base Metals Movements

• 3-month copper fell 0.1% to $9,619 per ton

• Lead rose 0.4% to $2,000 per ton

• Tin dropped 0.1% to $32,665 per ton

• Nickel declined 1.1% to $14,840 per ton

• Zinc, highly energy-intensive, rose 1.1% to $2,660 per ton