United States
The United States recently launched a strategic attack on Iran amidst a backdrop of subterfuge and misdirection. While the assault inflicted damage, the extent to which Iran’s nuclear capabilities were impacted remains unclear. The anticipation of Tehran’s potential retaliation looms as geopolitical tensions intensify. Meanwhile, gold prices have softened slightly, and August WTI crude oil has firmed, hovering near $74 after previously reaching ~$78.40. The US dollar has gained strength against G10 currencies, with antipodean currencies and the yen experiencing declines of over 1%. The Swiss franc and Canadian dollar have shown relative resilience, with the latter down by approximately 0.45%.
Market dynamics highlight key concerns, including the upcoming Congressional testimony of Federal Reserve Chair Powell and recent economic data indicating a weakening labor market. Initial jobless claims have been on the rise, reaching the highest level since mid-August 2023. Concurrently, tariffs and consumer anxiety continue to impact retail sales, which have seen back-to-back declines since late 2023. Industrial output has also shown signs of contraction in recent months. The Dollar Index has experienced a recovery, trading around 99.30-40, with expectations that the Federal Reserve will focus less on survey data and more on hard economic figures.
Eurozone
The euro has been navigating a volatile period, recently recovering from a dip to approximately $1.1430 last Thursday and gaining a cent by the weekend. However, a breach of this threshold could signal a deeper correction. European central bankers pay close attention to PMI data, with the composite index reflecting a stagnant eurozone economy in Q2 after an initial 0.6% expansion in Q1. Sluggish government spending and weaker net exports remain key drags on the economy, with subdued growth forecasted for H2 2025.
United Kingdom
Sterling experienced a recovery from its pullback below $1.34 on June 19, reaching beyond $1.35 before stalling at the 20-day moving average. Despite recent gains, economic indicators point to a weakening UK economy, following its strong 0.7% quarter-over-quarter growth in Q1. The Bank of England chose not to cut rates last week, with market speculation of a future rate cut in August. The UK’s manufacturing PMI rose for the third consecutive month, yet it remains below 50, while services PMI also showed modest improvement. The composite PMI edged up to 50.7, reflecting its best performance in Q2 2025.
China
The People’s Bank of China (PBOC) has been actively managing the dollar’s reference rate, aiming to temper the yuan’s appreciation. Despite this, the greenback shows resilience against the offshore yuan. Economic data indicates movement within a narrow range, with the PBOC setting the dollar’s fix at CNY7.1710. The yen has been under pressure, with the dollar reaching a mid-May high of JPY147.95. Despite a contracting Japanese economy in Q1 and a sluggish recovery in Q2, the yen’s momentum has been tested by market forces.
Japan
The Japanese yen extended its decline, trading near JPY147.95, approaching its highest level since mid-May. Japan’s economic growth faces headwinds, contracting by 0.2% in Q1 and exhibiting limited recovery prospects. Industrial output fell by 1.1% in April following a rise in Q1, and exports fluctuated slightly. Tensions with the US, particularly concerning tariff policies, pose additional challenges. The Bank of Japan remains cautious, holding its stance amidst these pressures. The preliminary June PMI composite rose to 51.4, driven by improved manufacturing activity and a slight uptick in services.
Canada
The Canadian dollar recently achieved a ten-month high but has faced a four-day decline, testing the resilience of the US dollar around CAD1.3800. The next focus is near CAD1.3865, marking recent highs. Economic indicators, such as May’s CPI data, are eagerly awaited. The Bank of Canada’s recent rate decisions have drawn attention to underlying inflation measures. Market expectations indicate potential rate cuts as the year progresses, with core readings averaging above 3.1% in April, the highest since Q1 2024.
Australia
The Australian dollar encountered resistance near $0.6500 before settling lower, trading around $0.6380 in European sessions. Economic highlights include a moderate rise in Australia’s composite PMI to 51.2 and anticipation of the May CPI. Market sentiment points to potential rate cuts by the Reserve Bank of Australia, aligning with expectations for the July meeting. Futures markets anticipate further rate reductions throughout the year, with a view to concluding the easing cycle by early next year.
Mexico
The Mexican peso is under pressure as the US dollar strengthens, with recent settlement above the 20-day moving average at ~MXN19.1745. Mexico’s economic calendar is packed, with upcoming central bank meetings and key data releases. The peso’s performance reflects broader market corrections, with expectations of a potential interest rate cut despite inflationary pressures. Retail sales and economic activity have shown mixed results, signaling fragility in Mexico’s economic recovery. A potential 50 basis point rate cut could adjust the overnight cash target rate to 8.0%, with market expectations of a terminal rate near 7.50%.
