Business Activity in Asia

In June, Australia and Japan saw better business activity. Australia’s flash PMIs showed growth in business, fueled by new orders, even though export orders fell. Japan’s flash composite PMI also went up, boosted by strong performance in services and manufacturing. The USD/JPY is trading close to a five-week high, and gold prices fell after an initial rise. President Trump mentioned potential regime change in Iran, raising fears of more conflict in the Middle East. This article explains a series of events triggered by recent US military actions targeting Iranian nuclear facilities. These strikes caused oil prices to spike sharply and strengthened the dollar. A large fleet of aircraft and cruise missiles was involved, leading to quick movements in major currency pairs, especially in the G10 countries. The USD improved while currencies like the AUD, NZD, and GBP weakened. Even safe-haven currencies like the JPY and CHF showed surprising weakness during the Asian session. For those closely watching geopolitical tensions and market volatility, this reaction follows a familiar pattern. Typically, crude prices rise during military conflicts, especially when they impact energy supply. After the initial spike at the Globex open, Brent crude was unable to maintain levels above short-term resistance, suggesting traders should be cautious not to overcommit to momentum trades lacking follow-through.

Market Reactions and Future Trends

Equity futures briefly fell after the news but quickly bounced back, recovering nearly all losses. This behavior indicates a market willing to adjust risk gradually rather than panic. The latest PMI data from Australia and Japan show a sense of stability; both countries reported improvements in business activity. Australia experienced growth due to domestic orders, despite a drop in export demand. In Japan, the services sector remained strong, and manufacturing output improved, lifting the composite PMI. Foreign exchange reactions show a shift from regional issues to global themes, especially regarding USD/JPY, which has reached new multi-week highs. This rise is supported by yield spreads and the waning safe-haven appeal of the yen. Meanwhile, gold—a go-to during crises—rose initially but then fell, indicating traders are reevaluating risk as market focus shifts from headlines to broader economic signals. President Trump’s comments about regime change escalated already high tensions, impacting market sentiment even after some price behaviors stabilized. The future will depend on how energy flows and regional alliances react. As North American markets reopen, we will likely see more significant movements. Ignoring the broad impact of geopolitical events on trading strategies would be unwise. As we analyze options and the correlation between spot and volatility, the quick reversal in oil’s rally suggests caution for high-beta currencies. Given this pattern across commodities and FX, the market hasn’t fully committed to a trend yet, guiding how traders manage risk in the short term. While yields and rate differences are crucial for mid-term pricing, short-term moves remain sensitive to developments from Washington and Tehran. In summary, without a sustained directional move in commodities or FX, derivative trading desks should stay alert to news headlines, while keeping an eye on slower-moving macro indicators. Create your live VT Markets account and start trading now.

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