The unpredictability of recent US tariff moves, combined with the provocative tone in which they were introduced—despite allowing time until August 1 for talks—has dominated market discussions. Additional tariff-related announcements are expected soon. The US dollar's brief rebound lost steam and is now trading weaker against nearly all major global currencies. The yen stands as an exception, continuing to lag. Among emerging market currencies, only the Taiwan dollar and Turkish lira are under slight pressure. Equities are performing surprisingly well overall, even as global bond prices have declined.

Asia Pacific Markets

In the Asia-Pacific region, attention centered on Japan and Australia. The dollar surged to a two-week high near JPY146.50, supported by rising US yields and fresh tariff news. Despite long-term Japanese bond yields jumping by up to 15 basis points, the yen remains weak. Japan’s current account surplus expanded in May, though trade balance figures deteriorated.
Meanwhile, in Australia, the Reserve Bank unexpectedly held rates steady, surprising markets that were largely expecting a cut. This decision boosted the Australian dollar, making it the strongest G10 performer, while its 10-year bond yield spiked eight basis points.

European Markets

The euro retreated following the US tariff news, briefly touching a six-day low before stabilizing. Economic data showed Germany’s trade surplus improved in May, while France reported a growing deficit. The eurozone's trade performance remains relatively strong, with an upward trend in the average monthly surplus.
In the UK, sterling pulled back but stayed above recent lows. Attention now turns to upcoming GDP figures, expected to show modest growth after a prior contraction. Meanwhile, rising UK bond yields reflect increasing fiscal pressure on the new Labour government, underscored by gloomy economic assessments from fiscal watchdogs.

American Markets

The US dollar initially gained on news of new 25% tariffs on South Korea and Japan, driven by the sharp tone in official communications. However, the momentum faded, and the greenback now trades in a tight range. Inflation expectations remain in focus, with surveys from the Fed and University of Michigan showing mixed results. Market-based indicators like breakeven rates suggest inflation may be easing. Despite high debt stress, US consumer credit is rising faster than last year, with borrowing projected to have increased significantly in May. All eyes are now on upcoming inflation data and further tariff announcements.