Market Overview
As markets transition into the second half of the year, a fragile geopolitical ceasefire between Washington and Tehran has provided temporary relief across commodity markets, yet underlying structural risks—from agricultural weather patterns to critical mineral supply chains—threaten to complicate the disinflation narrative that central banks have been banking on. The combination of sharply lower oil prices, technology sector selloffs, and moderating inflation expectations has eased near-term pressure on interest rates, but July presents multiple hard deadlines on trade policy, rare earth export controls, and monetary policy decisions that will test whether market complacency around these recurring crises remains justified.
United States
The US dollar extended its May gains through the first half of June, approaching the upper end of its established range around 100 on the Dollar Index. The Federal Reserve’s hawkish hold in June, coupled with continued apparent resilience across the US economy, sparked a significant surge in the greenback. Within a week, the dollar reached new year-to-date highs against more than half of the G10 currency basket. However, derivative markets are pricing in one rate hike fully and approximately a 50% chance of another, suggesting that the interest rate adjustment cycle may be nearly complete pending new economic information.
The composition of Federal Reserve officials’ projections reveals nuance in the policy outlook. Of the 18 Fed officials who participated in the Summary of Economic Projections exercise, only nine anticipated that at least one hike would be appropriate this year. Among those nine, roughly two-thirds believed that two or more hikes would be necessary. This distribution underscores the heterogeneity of views within the committee and suggests limited consensus around aggressive tightening.
The US economy continues to demonstrate resilience that has surprised many observers. The Bloomberg US hard data surprise model reached its highest level in four years during early June, indicating that economic data has consistently beaten consensus expectations. The labor market has shown particular strength. In 2025, the United States created an average of 10,000 jobs per month. By contrast, in the first five months of 2026, the average accelerated to nearly 115,000 jobs monthly—a substantial improvement that reflects underlying economic momentum.
A critical unknown facing policymakers and traders concerns the transmission mechanism of lower energy prices. The pullback in oil from its May 18 peak of over $100 per barrel to around $69 by late June—compared with a level just below $66 before the regional conflict began—raises the question of whether this disinflationary impulse will persist or whether lower energy costs will instead boost discretionary spending, thereby underpinning price pressures. This distinction carries profound implications for the Federal Reserve’s policy trajectory and inflation expectations for the remainder of 2026.
Eurozone
The European Central Bank lifted its key rates by 25 basis points in June, yet the Federal Reserve’s hawkish hold offset these gains in full. The euro extended its losses to a new low for the year, trading near $1.1325. While a break below $1.13 could theoretically target $1.11, technical analysts are more inclined to anticipate corrective gains in the coming weeks, based on the assumption that the US interest rate adjustment and data surprises have largely run their course. The US two-year premium over German yields may have peaked after reaching its best level since last September. The upside correction anticipated may have potential toward $1.1500.
The ECB is scheduled to meet on July 23. Having delivered a rate hike in June and given the retreat in oil prices since that decision, officials are likely to stand on the sidelines in July. Nevertheless, the swaps market has already fully discounted another 25 basis point hike by the end of 2026, suggesting market expectations for additional tightening despite the central bank’s likely pause.
Trade tensions between the European Union and China are escalating. The EU has begun taking a hardline stance toward the trade imbalance with Beijing, which risks retaliatory measures from Chinese authorities. Additionally, late in June, ahead of the July 4 deadline, the EU completed approval of a trade agreement with the United States. Under this arrangement, the EU agreed to end tariffs on US industrial goods and select agricultural products in exchange for a 15% tariff cap on European exports to America. Despite this negotiated settlement, the relationship between the two allies remains strained, particularly regarding digital services taxes and broader trade imbalances.
As of June 26, the spot EUR/USD rate closed at $1.1384, down from $1.1661 previously. The median Bloomberg one-month forecast stands at $1.1493, compared with $1.1694 before. The one-month forward rate is $1.1398, down from $1.1674. One-month implied volatility has risen to 5.6% from 5.0%, reflecting increased uncertainty around the euro’s trajectory.
United Kingdom
Sterling proved no match for the surging greenback in June, though it was one of only two G10 currencies that did not depreciate by 2% or more through June 26. The pound was sold to a marginal new low for the year at $1.3140 on June 24. If this support level does not hold, the risk may extend toward the $1.2980-$1.3000 area, representing a substantial technical breakdown.
UK economic data has presented a mixed picture. May retail sales, reported in volume terms, came in stronger than expected, and the April series was revised higher, suggesting some underlying resilience in consumer spending. However, headline and core consumer price inflation have been subdued, easing near-term concerns about runaway price pressures. The swaps market has dramatically repriced Bank of England expectations. As recently as mid-May, approximately 60 basis points of tightening this year were priced in. By late June, that figure had collapsed to approximately 20 basis points, reflecting a substantial downward revision in rate hike expectations.
Fiscal pressures are mounting for the UK government. A rising interest rate environment exhausts the government’s headroom on fiscal policy, and government borrowing in May reached its highest level for that calendar month since the pandemic began. This fiscal constraint comes at an inopportune moment, as a significant risk looms for July: the energy price cap is scheduled to increase by 13%, which will likely push UK consumer price inflation higher during that month and potentially force the Bank of England to reconsider its dovish tilt.
Political uncertainty has intensified. Prime Minister Starmer resigned, becoming the sixth UK leader since the Covid-19 pandemic began. A Labour Party leadership contest is underway, though with former health secretary Streeting endorsing former Manchester mayor Burnham, the process could resemble a coronation rather than a competitive race. This leadership transition is expected to conclude in mid-July and introduces political uncertainty into an already complex economic environment.
As of June 26, spot GBP/USD traded at $1.3200, down from $1.3456 previously. The median Bloomberg one-month forecast is $1.3235, compared with $1.3400 before. The one-month forward rate stands at $1.3205, down from $1.3455. One-month implied volatility has risen slightly to 6.3% from 6.1%.
Japan
Since the end of May, the dollar has traded within a defined range between approximately JPY159.25 and JPY161.95, with USD/JPY matching its best level since the end of 1986. The Bank of Japan intervened in the foreign exchange market during April and May, but unlike January—when the US Treasury offered explicit verbal support—Washington remained quiet about yen weakness in June. The BOJ’s 25 basis point rate hike failed to lend meaningful support to the yen, and neither did the subsequent decline in US interest rates. Market participants recognize that aggressive dollar buying is tempting another bout of intervention, and the BOJ’s rate hike combined with potential US support could alter the dynamics. It appears that dollar put options have been purchased in the options market, suggesting that some large pools of capital are buying insurance that could prove profitable if intervention materializes.
Outside of yen weakness, the conventional market view that the Bank of Japan is significantly behind in its monetary policy cycle appears exaggerated upon closer examination. First, core inflation has not exceeded the 2% target at any point this year. The US core PCE deflator, at more than double Japan’s 1.4% core rate, underscores the divergence in inflation dynamics between the two economies. Second, Japanese economic growth remains fragile. After contracting at a 2.3% annualized pace in Q3 2025, it took the next two quarters merely to recover the lost output. The median forecast in Bloomberg’s survey suggests near stagnation in Q2 2026 amid weaker consumption, government spending, and net exports. The futures market has the next BOJ hike nearly fully discounted at the end of the year, but this pricing may overstate the urgency of further tightening given the underlying economic weakness.
A significant emerging risk for Japanese industry stems from Chinese export controls on critical rare earths and magnets. Some efforts have been made to develop workarounds, identify alternatives, and eliminate certain magnets from production processes, but the impact may become more pronounced in the coming months as domestic Japanese inventories are depleted. Reports indicate that China has not exported any form of tungsten to Japan since the start of the year. Tungsten is used in precision machinery in the automotive sector, which accounts for approximately 10% of Japan’s GDP. China has also restricted shipments of several heavy rare earths, including yttrium, dysprosium, and terbium, which are essential in LED and semiconductor equipment manufacturing. Japanese companies have responded by attempting to reduce rare earth magnets in automobiles, relying on scrap materials as feedstocks, and increasing recycling efforts, but these adaptations have limits.
As of June 26, spot USD/JPY traded at JPY161.74, up from JPY159.27 previously. The median Bloomberg one-month forecast is JPY160.11, compared with JPY158.00 before. The one-month forward rate stands at JPY161.35, up from JPY158.88. One-month implied volatility has increased to 6.8% from 6.1%, reflecting heightened uncertainty around intervention risk and yen dynamics.
Canada
The Canadian dollar experienced a sustained slide that began from the May 1 low and extended through June, pushing the loonie to its lowest level since April 2025. The next important technical area for USD/CAD is near CAD1.43, representing a significant potential breakout level. The primary driver of this depreciation appears to be the divergence in monetary policy expectations between the United States and Canada. The US two-year premium over Canada has expanded from 90 basis points in early May to over 140 basis points by late June, approaching last year’s high near 155 basis points—the highest level since May 1997.
The Canadian economy faces persistent headwinds. The economy contracted at a 1.0% annualized rate in Q4 2025 and declined at a 0.1% annualized pace in Q1 2026, indicating two consecutive quarters of contraction. The Bank of Canada has responded with aggressive easing, cutting its overnight lending target rate by 100 basis points last year and 175 basis points in 2024. The policy rate currently stands at 2.25%. Headline inflation in May rose to 3.2% from 2.8% in the prior month, while the underlying core rates average approximately 2.05%. The central bank is scheduled to meet on July 15, but the market sees little chance of a policy change until Q4 at the earliest.
Trade policy presents an additional risk for Canada. The USMCA is unlikely to be reapproved by July 1, but this does not terminate the agreement. Instead, it would automatically enter a period of annual reviews that theoretically can continue until 2036. President Trump has threatened to withdraw from the agreement, though six months’ notice is required and Congress would demand a voice in any such decision. The uncertainty surrounding USMCA renewal adds to the loonie’s downward pressure.
As of June 26, spot USD/CAD traded at CAD1.4196, up from CAD1.3793 previously. The median Bloomberg one-month forecast is CAD1.4159, compared with CAD1.3700 before. The one-month forward rate stands at CAD1.4192, up from CAD1.3775. One-month implied volatility has risen to 4.5% from 4.0%.
Australia
June marked the second consecutive month of Australian dollar weakness. The aussie has not recorded back-to-back monthly losses since the end of 2024. The Australian dollar declined by approximately 3.9% through late June, which also represents its largest monthly decline since the end of 2024. Despite this recent weakness, over the first half of 2026, the Australian dollar is the strongest G10 currency, having appreciated 3.5% year-to-date and representing one of only two G10 currencies that have risen against the US dollar (the other being the Norwegian krone).
The Reserve Bank of Australia’s three rate hikes so far this year appear to be beginning to exert influence on currency dynamics. The futures market suspects that the mini-tightening cycle might be complete, though it sees risk of one additional hike in Q4 2026. The Australian dollar has approached the upper end of a support band in the $0.6830-$0.6850 area. A break below this level would signal another 1-2 cent decline, representing a substantial technical breakdown.
An important insight emerges from correlation analysis. Over the past 30 and 60 trading sessions, changes in the Australian dollar exhibit much stronger correlation with changes in the US two-year yield (negative correlation of -0.68) than with the Australian two-year yield (correlations of approximately 0.13 and 0.05, respectively) or the two-year interest rate differential (around 0.55). This pattern underscores that the aussie is being driven more by US monetary policy dynamics and global risk sentiment than by domestic Australian factors, a critical consideration for investors positioning in the currency.
As of June 26, spot AUD/USD traded at $0.6896, down from $0.7185 previously. The median Bloomberg one-month forecast is $0.6964, compared with $0.7150 before. The one-month forward rate stands at $0.6893, down from $0.7181. One-month implied volatility has increased slightly to 7.7% from 7.6%.
Emerging Markets
The Mexican peso, like most emerging market currencies, fell out of favor in June. It was only the fourth month since the end of 2024 that the peso declined against the US dollar. The dollar had been consolidating quietly in the lower end of its two-month range near MXN17.20 before the new Federal Reserve chair’s hawkish hold. Approximately one week later, the greenback reached MXN17.6765, its highest level since early April. The USD/MXN exchange rate is notably sensitive to the broader risk environment. Over the past 100 trading sessions, the correlation between changes in the exchange rate and the S&P 500 stands near 0.70, the highest level since 2020. Analysts had anticipated the dollar to rise into the MXN17.58-MXN17.65 area, and the next important technical area is MXN17.75-MXN17.80.
The Mexican economy appears to be gaining traction after contracting 0.6% in Q1 2026. Headline consumer price inflation is moderating and appears poised to move back within the 2%-4% target range, providing some relief from near-term price pressures. However, the review of the USMCA presents a significant risk for Mexico. The June 2026 US-Mexico talks included discussions of steel, aluminum, automobiles, rules of origin, and economic security. This agenda suggests that Washington is linking tariff relief and USMCA preferences to stricter regional-content and anti-circumvention measures, which could impose additional constraints on Mexican exporters.
As of June 26, spot USD/MXN traded at MXN17.5053, up from MXN17.3552 previously. The median Bloomberg one-month forecast is MXN17.5310, compared with MXN17.4000 before. The one-month forward rate stands at MXN17.5490, up from MXN17.3986. One-month implied volatility has risen to 8.5% from 8.4%.
The Indian rupee presented a notable exception to the broad emerging market currency weakness in June. The rupee rose by approximately 0.65% against the greenback during the month. However, the rupee’s weight in the Bannockburn World Currency Index is approximately 4.5%, making its impact de minimis on the broader index. The rupee’s outperformance reflects India’s relatively higher interest rates and continued investor interest in Indian assets, though broader capital flows have favored developed market currencies amid the divergence in monetary policy expectations.
The Chinese yuan’s trajectory warrants separate discussion given its systemic importance and the complexities of China’s rare earth export controls. This analysis is addressed in detail in the China section below.
China
Beijing has allowed the yuan to appreciate this year, and its approximately 2.8% year-to-date gain positions it near the top of emerging market performers. The other currencies that have appreciated more substantially have considerably higher interest rates, making the yuan’s appreciation noteworthy. However, the yuan’s appreciation is too modest to have meaningful impact on trade flows, and this has become a source of frustration for many of China’s trading partners, particularly following a recent OECD report that underscored the extensive subsidies that Chinese businesses have received. Calls for a new Plaza-like agreement to revalue the yuan are unlikely to gain traction without Beijing’s explicit consent, and neither the United States nor Europe have offered any quid pro quo that would incentivize such cooperation.
China has weaponized its control of critical materials since the US “Liberation Day” in April, and Japan has been especially targeted following Prime Minister Takaichi’s public statement of what many had already recognized: that China’s control of Taiwan would pose a direct security threat to Japan. After the United States added China’s largest companies to the growing list of firms that aid China’s military capabilities, Beijing retaliated in kind by blocking sales to two US rare earth companies and adding dozens of companies to a list that are banned from participating in Chinese government procurement.
The severity of China’s rare earth export controls cannot be overstated. Reports indicate that China has not exported any form of tungsten to Japan since the start of 2026. Tungsten is essential for precision machinery in the automotive sector, which represents approximately 10% of Japan’s GDP. Additionally, China has restricted shipments of several heavy rare earths, including yttrium, dysprosium, and terbium, all of which are critical in LED and semiconductor equipment manufacturing. The G7’s initiative to reduce reliance on any single country to 60% by 2030 and to 50% “as soon as possible” appears belated given that Beijing first weaponized its chokehold on rare earths and magnets against Japan more than a decade ago, in 2010, during a dispute over the Senkaku/Diaoyu Islands. Building refineries and separation facilities requires years, not quarters, underscoring the structural nature of this supply chain challenge.
A notable technical observation concerns the 100-day rolling correlation between the dollar’s movement against the offshore yuan and the Dollar Index. This correlation stands near 0.75, the highest level since late 2024, suggesting that yuan movements are increasingly synchronized with broader dollar strength rather than reflecting idiosyncratic Chinese factors.
As of June 26, spot USD/CNY traded at CNY6.8005, down from CNY6.7662 previously (representing yuan appreciation). The median Bloomberg one-month forecast is CNY6.7900, compared with CNY6.8000 before. The one-month forward rate stands at CNY6.8121, down from CNY6.7808. One-month implied volatility remains stable at 2.3%.
Global Markets
Equity markets across Asia, Europe, and the United States have experienced significant volatility as investors grapple with the implications of lower oil prices, technology sector selloffs, and shifting monetary policy expectations. The sharp decline in technology shares, which dominated much of the first half of 2026, has raised questions about whether this represents the end of what many observers characterized as a bubble or merely a dramatic bout of profit-taking during a transformational technological moment. The resolution of this question carries profound implications for the allocation of capital and the sustainability of equity valuations.
Sovereign bond markets have reflected the moderation in inflation expectations. The combination of lower oil prices and reduced technology sector valuations has taken pressure off interest rates globally. US Treasury yields have declined from their May peaks, though they remain elevated relative to historical averages. German bund yields have similarly retreated, reflecting the ECB’s June rate hike and subsequent pause. Japanese government bond yields remain constrained by the BOJ’s continued accommodation and the fragility of domestic growth.
Precious metals have responded to shifting monetary policy expectations and geopolitical developments. Gold, traditionally viewed as a hedge against inflation and currency depreciation, has benefited from the moderation in US real yields and the geopolitical tensions surrounding rare earth export controls and tariff disputes. Silver has moved in sympathy with gold, though with greater volatility reflecting its dual characteristics as both a precious metal and an industrial commodity.
Crude oil prices have experienced a dramatic reversal from their May peaks. August WTI crude oil has declined more than 30% from its May 18 peak of over $100 per barrel, reaching around $69 by late June, compared with a level just below $66 before the regional conflict began. This decline reflects the impact of the 60-day de-escalation between Washington and Tehran, which has resulted in a marked increase in traffic through the Strait of Hormuz. Brent crude oil has followed a similar trajectory, though the contango structure of the futures curve suggests that markets remain cautious about near-term supply disruptions. Gasoline prices have eased more slowly than crude oil, but the directional trend is clear, providing relief to consumers and potentially supporting discretionary spending.
The geopolitical ceasefire, however, masks deeper structural risks that could re-emerge. The 60-day de-escalation agreement is temporary in nature, and the underlying tensions that precipitated the conflict remain unresolved. Any escalation would quickly reverse the commodity price declines and reignite inflation concerns at precisely the moment central banks are hoping for disinflation.
An often-overlooked risk to the inflation outlook comes from weather patterns. The potential for a powerful El Niño is shaping up to disrupt agricultural output. Historically, such disruptions have resulted in higher prices for grains, beans, livestock, poultry, and palm oil. Markets spent the first half of 2026 fixated on energy-driven inflation. July may be when food prices begin pulling their own weight in the inflation conversation, at precisely the moment when central banks were hoping that headline inflation numbers would cooperate with the disinflation narrative. A second supply shock, this one agricultural rather than geopolitical, would substantially complicate the disinflation story that lower oil prices were supposed to deliver and could force central banks to reconsider their policy trajectories.
Critical Supply Chain Risks: Rare Earths and Minerals
Rare earths represent a quiet crisis with profound implications for global supply chains and geopolitical stability. Rare earth elements are found in everything from electric vehicle motors to precision-guided munitions, making them essential to both civilian and military applications. China’s reported curbs on shipments to Japan have been disruptive enough that Washington has intervened directly, asking Beijing to ease the restrictions. The specificity of these controls underscores Beijing’s willingness to use supply chain dominance as a geopolitical weapon.
The impact on Japanese industry has been substantial. Reports indicate that China has not exported any form of tungsten to Japan since the start of 2026. Tungsten is essential for precision machinery in the automotive sector, which accounts for approximately 10% of Japan’s GDP. China has also restricted shipments of several heavy rare earths, including yttrium, dysprosium, and terbium, which are used in LED and semiconductor equipment manufacturing. Japanese companies have responded by finding ways to reduce rare earth magnets in automobiles, relying on scrap materials as feedstocks, and increasing recycling efforts. While these adaptations provide temporary relief, they cannot fully substitute for the lost supply.
A single supplier controlling the bulk of global processing capacity is not a sustainable arrangement for any participant outside that supplier. The G7 has begun talking seriously about diversification, with new initiatives aimed at building processing capacity outside China. Starting with lithium and nickel, the G7 agreed to reduce dependence on any one country to 60% by 2030 and to 50% “as soon as possible.” However, talk is cheap. China first weaponized rare earths against Japan in 2010 over a dispute about the Senkaku/Diaoyu Islands. Refineries and separation facilities require years to construct, not quarters, and the rare earth supply story is a reminder that the most consequential supply chain risks are often the least visible until they become acute.
Trade Policy: Critical July Deadlines
Trade policy delivers two hard dates in July that carry significant implications for markets and corporate planning. The first critical deadline is July 9, when a batch of reciprocal tariffs is scheduled to revert to higher levels unless extended. This deadline has loomed over trade desks since the original truce was struck earlier in 2026. This is the date with the least ambiguity attached to it. Either an extension is announced beforehand, or the higher rates simply take effect, and the affected sectors will know within days which outcome they received. The stakes are substantial, as tariff increases would immediately raise input costs for manufacturers and potentially trigger retaliatory responses from trading partners.
July 24 brings the expiration of the Section 122 tariffs—the 10% levies imposed under the president’s balance-of-payments authority. Section 122 is a blunter, more legally contested instrument than the reciprocal tariff framework, and its expiration raises a genuine question of renewal versus lapse rather than a simple step up or down in rates. Two different legal mechanisms, two different expiration logics, all converging in the coming weeks. Markets that have grown comfortable treating tariff deadlines as negotiable will be tested on whether that complacency was earned or whether the new administration intends to allow these tariffs to take effect.
Adding to the complexity, in late June, President Trump threatened to impose 100% tariffs on European countries that impose a digital services tax. This threat introduces additional uncertainty into US-EU trade relations at a moment when both sides are attempting to negotiate a framework for managing their trade relationship. The threat of such punitive tariffs could either accelerate negotiations toward a settlement or escalate tensions further, depending on how European capitals respond.
Monetary Policy: A Wait-and-See July
Monetary policy, for once, may represent the quiet corner of global markets in July. The European Central Bank and the Bank of Japan both delivered rate hikes in June, and with oil prices now lower than when those decisions were made, the urgency behind further near-term tightening has eased substantially. Of the six G10 central banks scheduled to meet in July, the path of least resistance is standing pat and waiting to see how the ceasefire, the tariff deadlines, and the rare earths standoff resolve before committing to another policy move. This cautious approach reflects the reality that central banks are facing multiple cross-currents: moderating inflation from lower energy prices, potential food price pressures from El Niño, geopolitical risks that could re-emerge, and trade policy uncertainty.
The exception, and more interesting story, is the Federal Reserve. The new Federal Reserve chair’s first meeting produced a hawkish hold—a statement notably terse and stripped of the forward guidance that markets had grown accustomed to under the previous leadership. More tellingly, the new chair declined to submit his own projections to the Summary of Economic Projections, a small procedural choice that nonetheless signals something larger about the post-Powell Fed’s communication strategy. The post-Powell Federal Reserve is going to communicate differently, and July’s FOMC meeting will offer the first real test of whether that opacity is a deliberate strategy designed to preserve policy flexibility or simply a new chair still finding his footing in the role. Markets that built their playbooks around the old Fed’s communication style are operating with an outdated map.
Still, the idea that there is no forward guidance may underestimate the sophistication of market participants. The nine of 18 Fed officials expected at least one hike to be appropriate this year, and two-thirds of those officials see more than one hike being necessary. This distribution, while suggesting some divergence of views, does indicate that a meaningful minority of the committee sees additional tightening as warranted by current economic conditions. The challenge for markets is interpreting the new chair’s communication style and determining whether it represents a genuine shift toward opacity or a temporary adjustment as new leadership settles into the role.
Broad Currency Index Performance
The Bannockburn World Currency Index, composed of the currencies of the dozen largest economies—half from high-income countries and half from emerging markets—fell by a little more than 1% through late June after edging up by around 0.15% in May. The index is practically flat in the first half of 2026. The BWCI’s decline in June reflected the broad depreciation of nearly all currencies in the index. The greenback itself was unchanged, of course, as it accounts for approximately a third of the index and dampens the volatility of the BWCI. The only currency in the index that did not fall was the Indian rupee, which rose by about 0.65% against the greenback. However, the rupee’s weight is approximately 4.5%, making the impact de minimis on the broader index.
Among the G10 components, the Australian dollar fell the most, declining nearly 4%. The Canadian dollar experienced a 10-day slide in June and lost approximately 2.7% for the month. The euro depreciated by slightly more than 2%. The yen, where intervention was threatened, fell the least, dropping approximately 1.5%. Sterling eased about 1.8%. These movements reflect the complex interplay of monetary policy divergence, geopolitical risks, and shifting inflation expectations.
Turning to the emerging market components of the BWCI, the Russian ruble tumbled 8.75%. It carries a weight of approximately 2.5%, making the impact little more than a rounding error on the broader index. The Brazilian real lost around 2.7%, and the South Korean won fell slightly more than 2.1%. The Mexican peso slipped by approximately 0.85%, making it among the best performers in the index. The Chinese yuan, which has approximately a 21.5% weight, fell by 0.5%.
In early May, the BWCI took out the 2025 high but stalled near the late 2024 high. In June, it pulled back in two steps. The first decline was approximately 0.6%, bringing the index to about 91.70. It recovered and in the middle of the month rose to around 92.10. The second step down took it to almost 91.10, its lowest level since early April. The low for the year was recorded in late March near 90.75. This pattern of higher highs and higher lows, despite the recent pullback, suggests that the dollar remains in a broad uptrend, though near-term consolidation may be occurring.
