The U.S. dollar stayed firm last week as markets focused on inflation, interest rates, and the war affecting the Strait of Hormuz.

This week, traders may watch U.S. employment data, eurozone inflation, central bank comments, and developments in the Middle East.

Key Takeaways

• U.S. inflation remained high, which may keep interest rates elevated.
• Oil prices moved sharply as tanker traffic through the Strait of Hormuz changed.
• The Japanese yen remained near historically weak levels.
• U.S. jobs data may be the week’s biggest scheduled forex event.

What Happened Last Week?

US Inflation Stayed High

The U.S. PCE Price Index rose 4.1% year over year in May. Core PCE, which excludes food and energy, rose 3.4%.

PCE, or Personal Consumption Expenditures, is the Federal Reserve’s preferred inflation measure.

High inflation may reduce expectations for lower U.S. interest rates. This can support the dollar because higher rates may make U.S. assets more attractive.

US Growth Was Revised Higher

The U.S. economy grew at an annual rate of 2.1% in the first quarter of 2026.

GDP, or Gross Domestic Product, measures the value of goods and services produced by an economy.

The revision showed that the U.S. economy remained resilient, although consumer spending was weaker than previously reported.

Australian Inflation Slowed

Australia’s annual inflation rate eased from 4.2% to 4.0% in May.

The slowdown reduced some expectations for another Reserve Bank of Australia rate increase and placed attention on the Australian dollar.

Oil Reacted to the Strait of Hormuz

Oil prices fell early in the week as more tankers passed through the Strait of Hormuz and U.S.-Iran peace talks showed progress.

Prices rose again after a ship was attacked near Oman. They then dropped sharply on Friday as more oil shipments resumed.

The Strait of Hormuz is a narrow sea route used to transport about one-fifth of the world’s oil and liquefied natural gas supplies.

Disruptions can reduce energy supply, increase shipping costs, and push oil prices higher.

How Can the War Affect Forex?

Higher oil prices can increase inflation because fuel affects transportation, manufacturing, and consumer costs. This may influence how central banks set interest rates.

The U.S. dollar may receive safe-haven demand when investors become cautious. Safe-haven demand happens when investors move money into assets they consider more stable during uncertain periods.

The Canadian dollar may also react because Canada is a major oil exporter.

Energy-importing economies may face higher costs. This can pressure currencies such as the euro, British pound, and Japanese yen.

However, currency reactions may change quickly as peace talks, shipping activity, and oil prices develop.

What to Watch This Week

Monday to Wednesday: Central Banks and Inflation

The European Central Bank Forum runs from June 29 to July 1. Comments about inflation and interest rates may affect the euro.

Tuesday brings revised UK GDP, China’s PMI business surveys, and U.S. job openings data.

On Wednesday, eurozone inflation and the U.S. ISM Manufacturing PMI are scheduled.

PMI, or Purchasing Managers’ Index, shows whether business activity is growing or shrinking.

Thursday: US Non-Farm Payrolls

NFP, or Non-Farm Payrolls, measures U.S. job creation outside the farming sector.

The report also includes unemployment and wage growth. The results may change Federal Reserve interest rate expectations and create movement across U.S. dollar pairs.

Friday: US Market Holiday

U.S. markets will observe the Independence Day holiday on July 3.

Lower trading activity may result in wider spreads or sudden price movements.

Weekly Market Summary

EUR/USD may react to eurozone inflation, central bank comments, and U.S. jobs data.

USD/JPY may remain sensitive to the weak yen and possible action from Japanese authorities.

The Strait of Hormuz remains the key wildcard. New attacks, changes in tanker traffic, or progress in peace talks could quickly affect oil prices, inflation expectations, and forex sentiment.

Disclaimer

This article is for informational and educational purposes only and does not constitute financial advice. Trading involves risk. Conduct your own analysis or consult a qualified professional before making financial decisions.