What drove the FX market… Return of the King

Research evidence excerpt

What drove the FX market… Return of the King

2 July 2026

What drove the FX market… CurrenciesGlobal

Return of the King

Main events in June 2026

Tom Wookey

◆ USD extended its gains in June, supported by a hawkish Fed EuropeanHSBC BankFXplcStrategist

thomas.wookey@hsbc.com

◆ EUR came under pressure from stagflation risks, while GBP +44 20 79913367

faced political headwinds Paul Mackel

Global Head of FX Research

The Hongkong and Shanghai Banking Corporation

◆ The Fed, BoE, SNB, Norges, Riksbank, RBA, and BoC held Limited

policy rates, while the ECB and BoJ raised rates by 25bps paulmackel@hsbc.com+852 2288 5523

We look back at the key drivers Nick Andrews

Senior FX Strategist

In this report, we look back at the key drivers for global FX markets during the previous HSBC Bank plc

nick.andrews@hsbc.com

month. June saw a rally in the USD supported by a hawkish Fed. +44 207 9912376

The DXY index gained 2.3% whereas EUR-USD and GBP-USD fell 2.0% and 1.4% Vanchit Gupta

Associate

respectively. Bangalore

Brent fell 20.8% in June as geopolitical tension eased in the Middle East, while gold

behaved inversely to the USD and fell 11.7%. Bonds had a divergent path whereas

European equities outperformed in June.

What about our FX views?

◆ In the Currency Outlook: The cleanest dirty shirt (12 June 2026), we highlighted

that much depended on the Fed to remove the USD’s toughest stains; a

tightening cycle would change the USD’s fortunes for the better. We

subsequently updated our FX forecasts in the aftermath of the June FOMC (see

A new sheriff in town, 18 June 2026). The outcome of the meeting provided the key

ingredient to re-embrace a stronger USD again. We forecast a gradual USD

appreciation across our forecast horizon, instead of a more explosive rally.