Gold prices rose nearly 2% in European trading on Thursday, resuming gains that had paused temporarily on Wednesday and moving back toward a two-week high, supported by a softer US dollar and falling oil prices after the United States and Iran signed the peace agreement electronically.

The Federal Reserve meeting, chaired by Kevin Warsh for the first time, came in more hawkish than markets had expected. Warsh warned that inflation risks remain persistent and reaffirmed the central bank’s commitment to returning inflation to target, strengthening expectations that restrictive monetary policy will remain in place for longer and raising the chances of at least one interest rate hike before the end of the year.

Price action

• Gold rose about 2.0% to $4,330.04 per ounce, up from an opening level of $4,256.71, after touching an intraday low of $4,254.67.

• At Wednesday’s close, gold lost 1.75%, marking its first decline in five sessions, after earlier reaching a two-week high of $4,382.83 per ounce.

• In addition to profit-taking, gold came under pressure after the hawkish Federal Reserve meeting led by Kevin Warsh.

US dollar

The US Dollar Index fell 0.2% on Thursday, retreating from a three-month high of 100.57 and reflecting renewed weakness in the greenback against a basket of global currencies.

Alongside profit-taking, the dollar weakened as risk appetite improved following the electronic signing of the preliminary peace agreement between the United States and Iran.

Oil prices

Oil prices fell more than 1.0% on Thursday, extending losses for a sixth consecutive session and hitting their lowest levels in three months, pressured by International Energy Agency forecasts pointing to a supply surplus next year following the US-Iran agreement.

The US-Iran agreement

• The US and Iranian presidents officially signed the preliminary peace agreement electronically.

• Pakistani Prime Minister Shehbaz Sharif said he was honored to announce the electronic signing of the historic “Islamabad Memorandum of Understanding” between the United States of America and the Islamic Republic of Iran.

• Sharif confirmed that the official signing ceremony for the agreement between the United States and Iran will take place in Switzerland on Friday.

• US and Iranian diplomatic and security delegations have begun arriving at the Bürgenstock resort in Switzerland to finalize the historic draft understanding ahead of its formal signing on Friday.

• Iran’s IRNA news agency published images showing Iranian President Pezeshkian signing the memorandum of understanding between Iran and the United States.

• The Islamic Republic of Iran announced that the historic agreement has effectively entered into force.

Federal Reserve

At the conclusion of its fourth monetary policy meeting this year, and in line with most expectations, the Federal Reserve left interest rates unchanged on Wednesday for the fourth consecutive meeting.

The Federal Open Market Committee voted unanimously, 12-0, to keep the benchmark federal funds rate within the 3.50%-3.75% range, its lowest level since September 2022.

Monetary policy statement

New Federal Reserve Chair Kevin Warsh made a major change to the policy statement by removing previous wording that had indicated a bias toward future interest rate cuts, giving the central bank a more cautious and restrictive stance.

The Fed changed its description of inflation in the official statement to “elevated,” compared with the previous wording of “somewhat elevated,” while reaffirming the Committee’s firm commitment to returning inflation to its 2% target over the medium term.

The FOMC also said it will continue monitoring the impact of incoming data on the economic outlook and remains prepared to adjust monetary policy at any time if risks emerge that could prevent it from achieving its goals.

Economic projections

The quarterly economic projections released by the Federal Reserve on Wednesday included several important revisions:

• Economic growth: The Fed lowered its forecast for US growth this year to 2.2% from 2.4%. It left its 2027 growth forecast unchanged at 2.3%, while raising its 2028 forecast to 2.2% from 2.1%.

• Headline inflation: The Fed raised its headline inflation forecast for this year to 3.6% from 2.7% in the March projections. It also lifted its 2027 forecast to 2.3% from 2.2%, while leaving the 2028 forecast unchanged at 2.0%.

• Core inflation: The Fed left its core inflation forecast for this year unchanged at 2.7%, in line with March projections. It also kept its 2027 and 2028 core inflation forecasts unchanged at 2.2% and 2.0%, respectively.

• Target interest rate: The Fed raised its target rate projection for this year to 3.75% from 3.50%, and lifted its 2027 projection to 3.50% from 3.25%. It kept the 2028 projection unchanged at 3.25%.

• Members removed all previous projections that had pointed to rate cuts this year, while 9 out of 18 participants now expect at least one interest rate hike before the end of 2026.

Kevin Warsh

New Federal Reserve Chair Kevin Warsh said in his first press conference that the central bank is fully prepared to use all of its monetary tools to ensure price stability, stressing that the fight against inflation is not yet over and that the US economy remains resilient enough to withstand the current restrictive policy stance.

Key comments from Warsh included:

• Inflation remains far above the 2% target due to the Iran war.

• I expect to propose changes, including revisions to the Summary of Economic Projections.

• Some changes are coming and may require press conferences.

• Financial market pricing is the most important source of information used by central bankers.

US interest rates

• Following the meeting, CME FedWatch data showed the probability of the Federal Reserve leaving rates unchanged in July falling to 72% from 91%, while the probability of a 25-basis-point rate hike rose to 28% from 9%.

• The probability of rates staying unchanged in December fell to 15% from 45%, while the probability of a 25-basis-point rate hike increased to 85% from 55%.

Gold outlook

Kelvin Wong, Asia-Pacific market analyst at OANDA, said the market rebound reflects a partial covering of short positions in gold following Wednesday’s sharp decline, adding that the positive news from the Middle East also contributed by pushing oil prices lower.

Wong added that he expects gold’s upside to remain limited, as market participants have reassessed the likelihood of the Federal Reserve beginning a new rate-hike cycle.

SPDR Gold Trust

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 0.86 metric tons on Wednesday, bringing total holdings to 1,013.07 metric tons, rebounding from 1,012.21 metric tons, the lowest level since September 29, 2025.

The British pound rose in European trading on Thursday against a basket of major and minor currencies, attempting to recover from a two-month low against the US dollar. Sterling was supported by a softer dollar and lower oil prices following the electronic signing of the preliminary peace agreement between the United States and Iran.

Recent UK inflation data showed easing price pressures on policymakers, reinforcing expectations that the Bank of England will leave interest rates unchanged at today's meeting for a fourth consecutive time.

Price action

• GBP/USD today: The pound rose around 0.25% to $1.3320, up from an opening level of $1.3289, after touching an intraday low of $1.3285.

• Sterling lost 1.0% against the dollar on Wednesday, its biggest daily decline of the year, and fell to a two-month low of $1.3262 following the Federal Reserve’s hawkish policy meeting.

US dollar

The US Dollar Index fell 0.2% on Thursday, retreating from a three-month high of 100.57 points as the greenback weakened against a basket of global currencies.

Alongside profit-taking activity, the dollar came under pressure as risk appetite improved following the signing of the preliminary peace agreement between the United States and Iran.

Global oil prices

Oil prices fell more than 0.5% on Thursday, extending losses for a sixth consecutive session and remaining on track to hit fresh three-month lows. The decline followed International Energy Agency forecasts pointing to a supply surplus next year after the US-Iran agreement.

US-Iran agreement

• The US and Iranian presidents officially signed the preliminary peace agreement electronically.

• Pakistani Prime Minister Shehbaz Sharif said: “I am honored to announce today the electronic signing of the historic Islamabad Memorandum of Understanding between the United States of America and the Islamic Republic of Iran.”

• Sharif confirmed that the formal signing ceremony between the United States and Iran will take place in Switzerland on Friday.

• US and Iranian diplomatic and security delegations have begun arriving at the Bürgenstock resort in Switzerland to finalize the details of the historic agreement ahead of Friday’s official signing.

• Iran’s state news agency IRNA published photographs showing President Pezeshkian signing the memorandum of understanding between Iran and the United States.

• Iran announced that the historic agreement has officially entered into force.

UK interest rates

• UK inflation data released yesterday for May showed easing inflationary pressures on Bank of England policymakers.

• Money markets currently price the probability of a Bank of England rate hike at today’s meeting at 0%.

Bank of England

The Bank of England is set to conclude its policy meeting later today, with markets widely expecting policymakers to leave interest rates unchanged at 3.75%, the lowest level since December 2022, for a fourth straight meeting.

The interest rate decision, policy statement, and voting breakdown are due at 11:00 GMT.

Governor Andrew Bailey will hold a press conference at 11:30 GMT to discuss the outcome of the meeting, the inflation outlook, and the future path of UK interest rates.

Outlook for the pound

At Economies.com, we expect that if the Bank of England’s statement and Andrew Bailey’s comments prove more dovish than markets currently anticipate, expectations for multiple UK rate cuts in 2026 will increase, potentially placing additional downward pressure on the British pound.

The Japanese yen edged higher in Asian trading on Thursday against a basket of major and minor currencies, attempting to recover from its lowest level in two years against the US dollar. The currency is on track for its first daily gain in five sessions, supported by bargain buying and growing speculation that Japanese authorities may step in to support the local currency.

The US dollar retreated from a three-month high, while oil prices extended losses for a sixth consecutive session after the United States and Iran electronically signed a preliminary peace agreement.

Price action

• USD/JPY today: The dollar fell 0.1% against the yen to ¥160.49, from an opening level of ¥160.62, after touching an intraday high of ¥160.75.

• The yen ended Wednesday down 0.15% against the dollar, marking its fourth consecutive daily loss and hitting a two-year low of ¥160.80, pressured by the Federal Reserve’s hawkish policy meeting.

US dollar

The US Dollar Index slipped 0.2% on Thursday, pulling back from a three-month high of 100.57 points as the greenback weakened against a basket of global currencies.

In addition to profit-taking activity, the dollar is facing pressure from improving risk appetite following the preliminary peace agreement between the United States and Iran.

Global oil prices

Oil prices fell more than 0.5% on Thursday, extending losses for a sixth straight day and hovering near fresh three-month lows after the International Energy Agency warned of a supply surplus next year following the US-Iran agreement.

US-Iran agreement

• The US and Iranian presidents officially signed the preliminary peace agreement electronically.

• Pakistani Prime Minister Shehbaz Sharif said: “I am honored to announce today the electronic signing of the historic Islamabad Memorandum of Understanding between the United States of America and the Islamic Republic of Iran.”

• Sharif confirmed that the formal signing ceremony between the United States and Iran will take place in Switzerland on Friday.

• American and Iranian diplomatic and security delegations have begun arriving at the Bürgenstock resort in Switzerland to finalize the details of the historic draft agreement ahead of Friday’s official signing.

• The Islamic Republic News Agency (IRNA) published photos showing Iranian President Pezeshkian signing the memorandum of understanding between Iran and the United States.

• Iran announced that the historic agreement has officially entered into force.

Intervention zone

Japanese authorities are closely monitoring movements in the currency market, particularly as the yen approaches the ¥161 per dollar level. Trading beyond the key ¥160 threshold is increasingly viewed as a zone that could trigger renewed intervention.

Reuters sources indicated that Tokyo intervened several times in late April and early May to halt the yen’s decline. At that time, the exchange rate reached ¥160.72 per dollar, its weakest level since July 2024.

Japanese officials have repeatedly warned against excessive currency volatility, stressing that authorities are prepared to take decisive action against disorderly market moves.

Finance Minister Satsuki Katayama reaffirmed that the government is “ready to take appropriate action” if currency markets experience excessive or speculative movements.

Japanese interest rates

• Economic surveys continue to point to a 25-basis-point rate hike by the Bank of Japan in December as the most likely scenario.

• Money markets currently price the probability of a quarter-point rate increase at the July meeting at below 25%.

• Investors are awaiting additional data on inflation, employment, and wages in Japan to reassess the outlook for future interest rate moves.

The Canadian dollar weakened to its lowest level in seven months against its US counterpart on Wednesday as investors grew more cautious ahead of the Federal Reserve’s interest rate decision, while lower oil prices continued to weigh on the currency of one of the world’s major energy exporters.

The Canadian dollar fell 0.3% to C$1.4030 per US dollar, or 71.28 US cents, after touching an intraday low of C$1.4036, its weakest level since November.

George Davis, Chief Technical Strategist at RBC Capital Markets, said weakness in the Canadian dollar against the euro, British pound, and Japanese yen helped keep USD/CAD above the 1.4000 level over the past two sessions.

“We’re also seeing some short-covering in the US dollar ahead of today’s Federal Open Market Committee meeting, as market participants reduce risk exposure,” Davis said.

The US dollar edged slightly higher against a basket of major currencies before the conclusion of the Fed’s two-day policy meeting, the first chaired by Kevin Warsh since taking over as Federal Reserve Chair, with investors watching closely for any signs of a more hawkish policy stance.

In energy markets, oil prices rose 0.7% to $76.67 per barrel after President Donald Trump said the newly announced ceasefire agreement with Iran was not yet final and warned that hostilities could resume if he was dissatisfied with the implementation of the deal.

Despite the rebound, oil prices remain down roughly 10% since the start of the week.

“The decline in oil prices has also been a negative factor for the Canadian dollar because it weakens Canada’s terms of trade,” Davis added.

Investors are now looking ahead to Canada’s April retail sales report due on Friday, which could provide additional clues about the outlook for the domestic economy. Economists expect sales to rise 0.6% from March.

In the bond market, Canadian government bond yields were mixed across the curve, with the 10-year yield falling 1.9 basis points to 3.372%.