In the week ahead: FOMC Meeting Minutes, U.K. GDP

The Japanese Yen is currently drifting lower, reacting to weaker-than-expected domestic wage growth data. This selling bias against a broadly stronger US Dollar (USD) remains unabated, with the USD/JPY pair holding above the 145.00 psychological mark during the early European session on Monday.

A significant factor undermining the JPY is the latest domestic data, which revealed that real wages in Japan fell for the fifth consecutive month in May, marking their fastest decline in nearly two years. Additionally, investors remain concerned that global trade tensions, specifically those triggered by US tariffs, could complicate the Bank of Japan's (BoJ) efforts to normalize its monetary policy.

Despite these negative factors, several elements are expected to limit the JPY's losses. The growing market conviction that the BoJ will proceed with further interest rate hikes creates a notable divergence from expectations that the Federal Reserve (Fed) will resume its rate-cutting cycle in the near future. This divergence could cap the upside for the USD and provide support for the lower-yielding JPY. Furthermore, heightened geopolitical risks, such as the Israeli strikes on three Yemeni ports early this Monday, coupled with the persistent uncertainty surrounding US President Trump's erratic trade policies, are likely to contribute to safe-haven flows, further limiting the JPY's depreciation.

Gold prices (XAU/USD) are currently on the defensive, dropping to a multi-day low on Monday while still holding above the key $3,300 level. This downturn follows the US Dollar recently regaining positive traction and moving closer to its recent weekly highs, consequently undermining the precious metal.

However, several factors are poised to limit the Greenback's ascent, thereby offering support to safe-haven Gold. Among these are increasing market expectations that the Federal Reserve (Fed) will soon resume its interest rate-cutting cycle. Compounding this, investors remain concerned that US President Donald Trump's recently passed massive tax-cut and spending bill will exacerbate America's long-term debt issues.

Adding to Gold's appeal, escalating geopolitical risks are fostering a cautious global sentiment. This includes fresh Israeli strikes on Yemen—the first in nearly a month—and the persistent uncertainty surrounding Trump's erratic trade policies. Looking ahead, traders are keenly awaiting the FOMC meeting minutes on Wednesday for further insights into the Fed's rate-cut path and fresh market impetus.

Crude oil prices saw a recovery on Monday, bouncing back from declines recorded on Friday. Brent futures, which fell 0.54% on Friday, gained 0.83% on Monday, while WTI recovered 1% after a 0.95% Friday decline. This rebound occurred despite an announcement from OPEC+ over the weekend that had initially sparked concerns about market oversupply.

The Organization of Petroleum Exporting Countries and its allies, known as OPEC+, revealed on Saturday their plan to increase oil output by 548,000 barrels per day (bpd) in August. This scheduled hike is larger than the 411,000 bpd increases already implemented for May, June, and July. Furthermore, the group warned that it would consider another similar 548,000 bpd increase in September at their next meeting on August 3. This decision collectively signifies a continued rollback of the 2.2 million bpd in voluntary cuts that major producers like Saudi Arabia and Russia had initiated earlier this year to support prices.

U.S. stock index futures saw declines on Sunday evening, influenced by growing uncertainty surrounding President Donald Trump’s trade tariff plans and strong payrolls data that cast doubt on the Federal Reserve’s interest rate cut timeline. Reflecting this cautious sentiment, the US 500 that tracks the performance of the S&P500 mini futures fell 0.51% on Friday. The market's immediate focus is now squarely on President Trump's upcoming announcement of specific tariff rates against major U.S. trading partners, though the implementation deadline has been extended to August 1 from July 9. Adding to the pressure, hotter-than-expected nonfarm payrolls data for June, released on Thursday, led traders to sharply pare back bets on interest rate cuts in July and September.

Despite this pullback in futures, Wall Street's main indices had closed at record highs on Thursday, buoyed by hopes that Trump would again postpone his tariff plans. This strength was notably driven by technology stocks, with NVIDIA seeing extended buying due to its role in artificial intelligence. Other major tech companies, including Microsoft, Amazon, Meta, Alphabet, and Tesla, were also part of this broader technology sector rally that propelled the US 500 and US Tech 100 to new record highs on Thursday.

However, following the Independence Day weekend, investors could possibly look for increased volatility as markets digest both the trade uncertainty and the revised expectations for Fed rate cuts.