Markets Turn Defensive Ahead of FOMC Minutes as Geopolitical Risks Persist | 19th August, 2026

Markets Turn Defensive

Global markets adopted a defensive tone as investors awaited the Federal Reserve’s latest meeting minutes while renewed US-Iran tensions kept geopolitical uncertainty elevated. The US Dollar held above 99.50 on safe-haven demand, weighing on risk-sensitive currencies including the New Zealand and Australian Dollars, while the Canadian Dollar consolidated as traders also watched developments around US tariffs. In the UK, inflation returned to focus as higher energy costs were expected to push CPI to a four-month high, potentially influencing the Bank of England’s rate outlook.

US Dollar Index (DXY) Forecast

Current Price and Context

The US Dollar Index held above 99.50 as escalating concerns surrounding Iran and the Strait of Hormuz encouraged defensive flows into the Greenback. Investors were also reluctant to make large directional moves ahead of the FOMC Minutes, which could provide fresh insight into policymakers’ views on inflation and interest rates.

Key Drivers

• Safe-Haven Demand: Geopolitical uncertainty continues to provide underlying support for USD.

• FOMC Minutes: Traders are looking for clues about the Fed’s assessment of inflation and the future policy path.

• Middle East Risks: Continued uncertainty around Iran and Hormuz is supporting defensive positioning.

• Treasury Yields: Higher yields could strengthen the Dollar further if the Minutes lean hawkish.

• Monetary Policy: Changing expectations for another Fed rate hike remain an important driver.

Technical Outlook

• Trend: Neutral to Bullish

• Resistance: 100.00

• Support: 99.40

• Forecast: DXY could remain supported above 99.50 ahead of the Fed Minutes. A more hawkish-than-expected message could encourage another test of 100.00, while dovish signals could revive selling pressure.

Sentiment and Catalysts

• Market Sentiment: Cautiously bullish amid defensive demand.

• Catalysts: FOMC Minutes, Treasury yields, US-Iran developments and upcoming US economic data.

Learn More

Publication date:

19 August 2026 - 11:56 (GMT)

Current Price and Context

The New Zealand Dollar slipped to a weekly low as firm US Dollar demand outweighed support from domestic developments. NZD/USD extended its retreat from the 0.5925 area, its strongest level since early June, as investors reduced exposure to risk-sensitive currencies ahead of the FOMC Minutes.

• US Dollar: Safe-haven demand for USD remains a headwind for the Kiwi.

• FOMC Minutes: Fed policy signals could determine whether the Dollar maintains its advantage.

• Risk Sentiment: Defensive positioning generally weighs on higher-beta currencies such as NZD.

• RBNZ Outlook: New Zealand monetary-policy expectations could cushion deeper losses.

• Geopolitical Risks: US-Iran uncertainty continues to discourage aggressive risk-taking.

• Resistance: 0.5900

• Forecast: NZD/USD could remain under pressure while the Dollar retains safe-haven support. A recovery above 0.5900 would be needed to improve the near-term bullish outlook.

Sentiment and Catalysts

• Market Sentiment: Moderately bearish.

• Catalysts: FOMC Minutes, RBNZ expectations, US-Iran developments, Chinese data and broader risk sentiment.

Current Price and Context

USD/CAD consolidated around 1.3900 as investors balanced firmer US yields against uncertainty surrounding trade policy and the Federal Reserve outlook. The Canadian Dollar also remained sensitive to energy prices, while markets monitored developments surrounding the US tariff deadline.

• Trade Policy: Developments surrounding US tariffs remain particularly important for the Canadian Dollar.

• FOMC Minutes: Fed policy signals could drive the next directional move in USD/CAD.

• Oil Prices: Elevated crude prices provide underlying support for the commodity-linked CAD.

• US Yields: Firmer Treasury yields can support the US Dollar and limit CAD gains.

• Geopolitical Risks: Middle East tensions remain supportive for energy prices but also encourage USD safe-haven demand.

• Resistance: 1.3950

• Forecast: USD/CAD may remain range-bound around 1.3900 until traders receive greater clarity from the FOMC Minutes and trade developments. Stronger oil prices could favor CAD, while hawkish Fed signals could push the pair higher.

Sentiment and Catalysts

• Market Sentiment: Neutral as competing fundamental drivers keep the pair in consolidation.

• Catalysts: FOMC Minutes, US-Canada trade developments, crude oil prices, Treasury yields and Bank of Canada expectations.

Current Price and Context

The Australian Dollar reversed earlier gains as escalating Iran-related risks increased demand for the US Dollar. AUD/USD pulled back from around 0.7119 as investors became more cautious ahead of the Fed Minutes, although expectations surrounding future RBA policy could provide some support to the Aussie.

• Geopolitical Risks: US-Iran uncertainty is weighing on the risk-sensitive Australian Dollar.

• US Dollar: Safe-haven demand has strengthened the Greenback and pressured AUD/USD.

• FOMC Minutes: Fed guidance represents the key near-term catalyst.

• RBA Outlook: Australian rate expectations may help limit deeper AUD weakness.

• Risk Sentiment: A deterioration in global risk appetite generally works against the Aussie.

• Trend: Neutral to Bearish

• Resistance: 0.7120

• Forecast: AUD/USD could remain vulnerable below 0.7120 while geopolitical uncertainty supports the Dollar. A break below 0.7050 would increase downside risk, while improving sentiment could allow buyers to challenge recent highs again.

Sentiment and Catalysts

• Market Sentiment: Cautiously bearish as defensive positioning weighs on AUD.

• Catalysts: FOMC Minutes, RBA commentary, US-Iran developments, Chinese economic conditions and global risk appetite.

Current Price and Context

The British Pound faces an important domestic catalyst as UK CPI is expected to show inflation accelerating to a four-month high, driven partly by higher energy bills. Sterling had already come under some pressure following softer UK labor figures, making the inflation report particularly important for expectations surrounding the Bank of England’s next policy move.

• UK Inflation: Higher energy costs are expected to contribute to renewed headline inflation pressure.

• BoE Expectations: A stronger CPI reading could reinforce expectations that UK rates need to remain restrictive.

• US Dollar: Safe-haven demand for USD could limit Sterling gains even if UK inflation surprises higher.

• FOMC Minutes: Fed policy signals will also influence the Dollar side of GBP/USD.

• Geopolitical Risks: Persistent Middle East uncertainty remains a broader headwind for risk sentiment.

• Resistance: 1.3600

• Forecast: GBP/USD could see increased volatility around the UK CPI release. A stronger inflation reading may support Sterling through firmer BoE expectations, while softer data combined with a hawkish Fed message could increase downside pressure.

Sentiment and Catalysts

• Market Sentiment: Neutral ahead of major UK and US policy catalysts.

• Catalysts: UK CPI, FOMC Minutes, Bank of England expectations, US Treasury yields and geopolitical developments.

Markets remained defensive as investors balanced geopolitical uncertainty against two major monetary-policy catalysts. Safe-haven demand kept the US Dollar supported above 99.50, contributing to weakness in the New Zealand and Australian Dollars, while USD/CAD remained caught between firm US yields, trade uncertainty and support for CAD from energy markets. Meanwhile, UK inflation represents an important test for Sterling, with higher energy costs expected to push CPI higher and potentially reshape expectations for Bank of England policy.

Attention now turns firmly to the FOMC Minutes, with traders looking for evidence on how divided policymakers are over the future path of interest rates. Combined with UK inflation, tariff developments and continued US-Iran tensions, the Fed Minutes could determine whether defensive positioning persists or risk appetite begins to recover.

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