Speculation around Japanese intervention to stabilize its government bond market helped the U.S. dollar recover from recent losses, triggering a wave of short-covering. Despite a weak finish last week and a sell-off yesterday, the dollar has climbed across the G10 currencies, with the yen showing the most significant weakness, dropping nearly 0.75%. U.S. Treasury yields declined, with the 10-year yield falling to around 4.47%. Equity markets showed mixed performance, with gains in Europe and the U.S., while parts of Asia remained subdued. Commodities were also mixed, with oil extending gains and gold under pressure, nearing its recent lows.

Asia Pacific Markets

In Japan, signals from the Bank of Japan and talk of intervention in the bond market have supported a sharp rebound in the dollar against the yen. Japanese yields dropped dramatically, with 30- and 40-year bond yields falling to multi-week lows. The yen dipped to new recent lows. Meanwhile, concerns grow over Japanese insurers facing unrealized bond losses, partially offset by equity gains.
In Australia, the local dollar reached a new high for the year but has since softened. Inflation data expected tomorrow may show a slowdown, but it is unlikely to impact upcoming central bank decisions.

European Markets

The euro surpassed $1.1400 for the first time in over a month but later pulled back to near $1.1335. Italian debt has received a boost, as Moody’s upgraded its outlook, and Italy's bond premium over Germany hit a four-year low. Eurozone sentiment improved modestly, but the market response was muted.
In the UK, sterling surged to nearly $1.3600, its highest since 2022, following strong CPI and retail data. Rate cut expectations have been delayed, now projected for November. The pound has also gained ground against the euro, adding further support. Market focus remains on technical resistance between $1.3630 and $1.3650.

American Markets

The U.S. dollar's recent slide extended to a monthly low near 98.70 on the Dollar Index before rebounding sharply to around 99.40. The rally followed signs that Japanese authorities may intervene in bond markets, giving the greenback a lift. A potential move above 99.50 could target 100.00. A previously threatened 50% U.S. tariff on EU goods has been postponed until July 9, reducing near-term trade tensions. Upcoming U.S. data includes durable goods orders, where weakness in Boeing orders may weigh on the headline number, while core figures are expected to show stability. Consumer confidence and house price data are also due, with modest improvements anticipated. Markets reopened after a long weekend.