Dollar Near One-Year High as Iran Talks Progress

The US dollar remained close to a one-year high after US-Iran negotiations in Switzerland produced a roadmap towards a potential agreement within 60 days. Sterling weakened to around $1.3210 as investors assessed the political future of Prime Minister Keir Starmer, while the yen stayed near its weakest level since 1986. Brent crude fell below $79 per barrel as hopes for increased Iranian oil exports improved the supply outlook, and spot gold recovered to around $4,176 per ounce after reaching a one-week low late last week.

Equities

The FTSE 100 fell 0.4% on Friday to close at 10,363, leaving the index down 1% for the week and marking its weakest weekly performance since early May. The FTSE 250 also declined, ending the session 0.6% lower and posting a weekly loss of 0.5%. UK government bond yields climbed to a one-week high following stronger-than-expected public borrowing figures and growing political uncertainty after Andy Burnham’s parliamentary election victory increased pressure on Prime Minister Keir Starmer.

Energy stocks provided support for the London market as crude oil prices moved higher during Friday’s session. BP closed 2.8% higher, while Shell gained 1.1%. Oil later eased after developments in Middle East peace negotiations and the reopening of shipping routes through the Strait of Hormuz.

Mining shares weighed heavily on the index. Anglo American and Rio Tinto both closed 2.6% lower, while Glencore fell 1.6%. Precious metals producer Fresnillo dropped 4.6%, making it one of the weakest performers in the FTSE 100.

Admiral Group declined 3.2% after RBC downgraded the insurer to “sector perform” ahead of its upcoming results. Housebuilder Barratt Redrow fell 1% after announcing the appointment of former British Airways finance chief Rebecca Napier as its new chief financial officer. Entain slipped 1.2% after reports that the Ladbrokes owner had begun exploring strategic options for its Central and Eastern European joint venture, including a potential sale.

In global markets, the MSCI All-World Index fell 0.15% on Friday as planned peace talks between the United States and Iran were called off. European equities also finished lower, while US stock index futures pointed to modest declines. Cash trading on Wall Street was closed for the Juneteenth holiday.

The US dollar strengthened further, reaching a 13-month high after Federal Reserve Chair Kevin Warsh reiterated his commitment to tackling inflation. Investors increasingly expect at least one US interest-rate increase this year. The Japanese yen remained under pressure near ¥161.3 per dollar, keeping markets alert for possible intervention from Japanese authorities.

Sterling traded around $1.321 after the Bank of England left interest rates unchanged at 3.75% in a 7-2 vote, with two policymakers supporting a rate increase. The more hawkish voting split contributed to higher gilt yields and reinforced expectations that UK policymakers remain focused on inflation risks.

Forex & Commodities

The US dollar was little changed early on Monday, holding near a one-year high as investors reacted to the outcome of the first round of US-Iran talks in Switzerland. Mediators said both sides had agreed on a roadmap towards a final agreement within 60 days. The dollar index traded around 100.9, while the euro slipped to $1.146. The Japanese yen weakened to ¥161.7 per dollar, close to its weakest level since 1986, prompting fresh warnings from Japanese Finance Minister Satsuki Katayama that authorities remain ready to respond to excessive currency moves.

Sterling edged lower to $1.321 as traders assessed political developments in the UK following a strong parliamentary by-election result for Andy Burnham. Analysts suggested that expectations for the UK’s fiscal framework remain broadly unchanged for now, limiting the impact on the pound.

Gold recovered from a one-week low, with spot gold rising to $4,176 per ounce early on Monday. Support came from lower oil prices and ongoing geopolitical uncertainty, although gains were restrained by expectations that US interest rates could move higher later this year.

Central bank expectations remained in focus after last week’s Federal Reserve meeting. Markets increased their expectations for further US rate rises following comments from Federal Reserve Chair Kevin Warsh, with traders now largely expecting at least one quarter-point increase by September and assigning a high probability to another move before year-end. US Treasury yields extended their advance, with two-year yields reaching their highest level since early 2025.

In oil markets, Brent crude fell early on Monday to $79.38 per barrel after US-Iran discussions concluded with indications of progress. Iranian officials said agreements had been reached covering oil and petrochemical export waivers, raising the prospect of additional supply reaching global markets. Brent had risen above $82.30 at the start of trading before reversing course as the talks progressed.