### United States
Today’s major economic disruption comes from the U.S., stemming from the 35% tariff imposed on Canada and President Trump’s suggestion of a universal tariff of 15%-20%, compared to the previously considered 10%. This has raised concerns particularly as we await a tariff letter for the EU, given the U.S.’s recent dealings with Canada and Brazil, both of which have trade surpluses with the U.S. The exact repercussions for Canada, given their existing free-trade agreement, remain unclear.
The U.S. dollar has strengthened against G10 currencies, notably affecting the Japanese yen, which has suffered losses between 0.5%-0.6%. The Canadian dollar has hit a new monthly low, falling around 0.35%, and the British pound is down about 0.25%.
U.S. index futures are also down by 0.5%-0.6%. Benchmark 10-year interest rates have risen by 2-3 basis points across Europe and are also significantly higher on the week across the U.S. Such rate movements are crucial as they influence currency valuations. A 3 basis point increase has been observed in U.S. 10-year Treasury yields today.
### Eurozone
The Eurozone is poised to receive a tariff letter from the U.S., following similar threatening communications to Canada and Brazil. The euro experienced an outside day yesterday but managed to stabilize within Wednesday’s range, dropping to a two-week low just under $1.1665. Today, it re-tested this level while staying mostly below the previous day’s settlement of a little over $1.1700.
Significant euro options worth 1.7 billion are set to expire today at the $1.17 level. Moreover, the euro has not closed below its 20-day moving average in nearly two months, highlighting its resilience despite trade tensions.
### United Kingdom
The UK’s economy showed unexpected contraction in May, declining for the second month consecutively, which has weighed on the sterling, reducing it by approximately 0.25%. This economic weakness was evident with industrial and manufacturing output falling sharply in May. Industrial production fell by 1.0%, accelerated by manufacturing’s 1.0% drop.
Despite the trade deficit narrowing slightly, the latest GDP data has led the swaps market to anticipate a Bank of England rate cut next month with about a 90% probability.
### China
China’s yuan stands out among emerging market currencies, appreciating after the People’s Bank of China set the dollar’s fix at its lowest level since last November. The currency saw movements within the CNH7.15-CNH7.19 range and is not trading above CNH7.20 in the past month.
Trade surplus expectations for June indicate an increase from $103.2 billion to around $113 billion, marking another potential $100 billion monthly surplus in 2025. Chinese exports, on a year-over-year basis, grew by 6% in 2024 and in the first five months of 2025, exports have risen by an average of 5.6%.
### Japan
In Japan, the yen has depreciated as U.S. rates rose, impacting its standing against the dollar and placing the yen near the bottom of the leaderboard. The dollar rose to the week’s high nearing JPY147.20 aided by increasing U.S. yields. Meanwhile, Japan’s own 20-year bond demand was below average though it improved since March.
Japanese 30-year bond yields have surged nearly 20 basis points this week, reflecting a volatile bond market.
### Canada
Facing a new U.S. tariff threat, the Canadian dollar has fallen to its lowest point for the month. The tariff assembled at 35% is a nearly blindside move after Brazil’s example of a 50% tariff, casting doubts over the U.S.-Canada trade relationship. Despite Canada’s running trade surplus excluding energy with the U.S., tariffs have fueled concern.
Canadian labor market data reporting today is pivotal, and while unlikely, a weak result may increase the chance of an interest rate cut by the Bank of Canada at its upcoming meeting, though the likelihood remains low according to current market predictions.
### Australia
The Australian dollar, after several days of stable trading, appreciated slightly, reaching a new 2025 high above $0.6590 yesterday, though it fell back below $0.6600 due to generalized U.S. dollar strength on the recent tariff policies.
### Mexico
After hitting a new annual low of MXN18.55 on Wednesday, the U.S. dollar rebounded against the Mexican peso, nearly reaching MXN18.70 on Thursday. Concurrently, Mexico is poised to release its industrial production data for May, with anticipations of a 0.1% dip, following a slight increase in March. The country’s manufacturing sector has struggled to achieve growth according to recent PMIs, and the economy shows signs of stagnation with unemployment and manufacturing output facing hurdles.
