# United States
The US is currently at the center of discussions due to its unpredictable tariff policies. Announcements of additional tariffs, including a notable 25% on South Korea and Japan, have been accompanied by a firm tone. This decision, set to take full effect by August 1st, leaves room for negotiation in the interim. Meanwhile, the dollar, which initially rose following the tariff news, has seen a short-lived rally, weakening against most global currencies today. Interestingly, the yen is the only G10 currency underperforming against the weakening greenback. Among emerging market currencies, only the Taiwan dollar and Turkish lira have shown slight depreciation. In financial markets, equities have performed unexpectedly well despite the circumstances, while bonds have faced sell-off pressures. Long-term yields, like the 10-year US Treasury yield, have increased by around three basis points, bringing it just over 4.41%. Simultaneously, inflation expectation metrics, both survey-based and market-derived, depict a moderated outlook. Consumer credit continues to expand at a rate surpassing that of the previous year, illustrating heightened borrowing tendencies among consumers.
# Eurozone
The euro has experienced downward pressure due to the strengthened US dollar amidst tariff developments but managed to remain above the $1.1700 mark, recovering to $1.1765. The German and French trade figures provide mixed results. Germany’s trade surplus expanded to 18.4 billion euros in May, driven by reduced export and import volumes, improving upon the year-to-date average of 17.8 billion euros. Conversely, France’s trade deficit worsened to 7.77 billion euros, pushing the average shortfall up from previous levels. These figures provide insight into the broader eurozone’s trade dynamics, with aggregated numbers anticipated on July 16th.
# United Kingdom
The British pound has encountered some resistance yet managed to maintain levels above last week’s lows. Persistent weak economic growth is exacerbating the difficult fiscal decisions facing the Labour government. Economic projections anticipate a meager 0.1% growth in May following an April contraction. In financial markets, the 10-year UK Gilt yield has returned to previous highs following recent political developments. The Bank of England’s financial stability report, expected tomorrow, will be closely monitored amidst these economic challenges.
# China
Despite the establishment of a two-week high for the dollar against the offshore yuan, follow-through buying fell short, and the currency pulled back slightly. The People’s Bank of China (PBOC) set the dollar’s reference rate at CNH7.1534, reflecting a tactical approach to managing reserves and bond market activity. China’s foreign exchange reserves have risen to the highest level since 2015, mainly due to the dollar’s decline and bond market gains. Notably, the PBOC has continued to bolster gold holdings, indicative of strategic diversification. China’s upcoming reports on consumer and producer prices will provide further economic insights.
# Japan
The yen is experiencing difficulty sustaining momentum against the dollar, which has been buoyed by rising yields and recent tariff announcements. The dollar is reaching near JPY146.50, a two-week high. Meanwhile, Japan’s May current account surplus showed typical seasonal improvement, yet the trade balance deteriorated significantly. This uneven performance contributes to the tempered anticipation of near-term Bank of Japan policy tightening. Furthermore, the nominal and real labor earnings data has led to recalibrations within the market, with fewer expectations of interest rate hikes.
# Canada
The Canadian dollar touched a recent low before rebounding to a more stable range. Economic indicators, including the IVEY PMI, remain subdued, reflecting economists’ predictions of slight economic contraction. Canada’s employment data, expected at the end of the week, will be pivotal given the current high unemployment rate projections. Despite challenges in the economic landscape, Canada remains focused on maintaining stability.
# Australia
The Reserve Bank of Australia’s decision to maintain current interest rates surprised markets, given the anticipation of a cut. The board’s split vote underscores a nuanced debate on the timing of potential rate changes. This decision buoyed the Australian dollar after recent sell-offs, redirecting market expectations for monetary policy. The Reserve Bank of New Zealand’s upcoming meeting will be similarly scrutinized, even though a change is not anticipated immediately.
# Mexico
The Mexican peso is displaying resilience after a brief dip, supported by favorable recent vehicle production and export figures. With the scarcity of economic reports early in the week, attention will turn to CPI data and industrial production figures due soon. Mexico’s inflation numbers, anticipated to remain above target levels, and potential Banco de México policy decisions in August are noteworthy focal points for market watchers. The broader context of global vehicle sales, wherein the US has shown positive growth, aids in positioning Mexico’s economic outlook.
