Forex Today: Markets stabilize despite lack of clarity over US-Iran truce deal

Here is what you need to know on Wednesday, May 27:

Major currency pairs fluctuate in familiar ranges midweek as investors refrain from taking large positions, while waiting for clarity over a potential Memorandum of Understanding (MOU) between the United States (US) and Iran. In the second half of the day, the US economic calendar will feature ADP Employment Change 4-week Average data and several Federal Reserve (Fed) policymakers will be delivering speeches.

After the US carried out what it called "self-defense strikes" on Iranian missile sites and mine-laying vessels, Iran's Islamic Revolutionary Guard Corps (IRGC) threatened to retaliate. The IRGC also called the US' action a violation of ceasefire and noted that it downed a US drone and fired at a fighter jet. Still, there is no official confirmation of a cancellation of the ceasefire and the US and Iran are reportedly still working toward finalizing the MOU, specifically trying to resolve the disputes over language regarding Iran's nuclear program and sanctions relief.

The US Dollar (USD) Index moves sideways slightly above 99.00 after posting marginal gains on Tuesday. In the meantime, US stock index futures are up about 0.2% in the European morning on Wednesday.

The Reserve Bank of New Zealand (RBNZ) announced early Wednesday that it left the policy rate unchanged at 2.25%, as expected. In the policy statement, the RBNZ noted that the Middle East conflict is increasing near-term inflation and weakening the economic activity. Additionally, the interest rate projection for June 2027 got revised higher to 3.07% from 2.62%. In the post meeting press conference, RBNZ Governor Anna Breman acknowledged that rate hikes are likely at coming meetings, depending on data. NZD/USD gathered bullish momentum following the RBNZ event and was last seen trading at 0.5870, rising about 0.6% on the day.

The data from Australia showed earlier in the day that annual inflation, as measured by the change in the Consumer Price Index (CPI), declined to 4.2% in April from 4.6% in March. This print came in below the market expectation of 4.4%. AUD/USD stays under bearish pressure following the soft inflation print and was last seen losing 0.4% on the day near 0.7140.

Gold continues to edge lower after losing more than 1% on Tuesday and trades below $4,500 in the European session on Wednesday.

EUR/USD moves sideways slightly below 1.1650 after posting marginal losses on Tuesday.

USD/JPY trades flat on the day at around 159.30 after rising 0.25% on Tuesday.

GBP/USD fell more than 4% on Tuesday and erased Monday's gains. The pair struggles to gain traction on Wednesday and trades below 1.3450.