The U.S. dollar steadied today following a sharp increase the previous day, but its strength appears more muted in Asia and Europe compared to North America. President Trump hinted at potential sector-specific tariffs on pharmaceuticals and semiconductors, possibly starting August 1, and mentioned upcoming bilateral trade deals. The dollar remains slightly softer against most G10 currencies, with Scandinavian currencies underperforming. Among emerging markets, central European currencies, the Chinese yuan, and the Mexican peso stood out with relative strength. Meanwhile, the People’s Bank of China raised the dollar’s reference rate for the third straight day — a rare move not seen in two months.

Asia Pacific Markets

The Japanese yen has weakened in seven out of eleven sessions this month, with four days showing gains over 1% for the dollar, including yesterday. The dollar recently surpassed JPY149, reaching its highest level since April. The Bank of Japan acted preemptively, offering U.S. dollars via repo operations backed by government securities, aiming to prevent disruptions from maturing dollar-based liabilities.
Meanwhile, the Australian dollar has pulled back from its yearly high, now facing resistance near $0.6535. If it breaks below $0.6500, a deeper slide could follow, possibly confirming a bearish double top formation. Markets are awaiting Australia’s June labor report, which is expected to show modest job growth and stable participation.

European Markets

The euro has declined for five consecutive sessions, its longest slide since March, and is now trading below both its 20-day and 5-day moving averages. Though it dipped below $1.16, it has stabilized without regaining $1.1630. May’s eurozone trade surplus reached €16.2 billion, slightly under this year’s monthly average. However, large trade surpluses don't guarantee currency strength, as capital flows often have greater impact.
In the UK, sterling has dropped eight sessions in a row, nearing key technical levels. June inflation came in hotter than expected at 3.6% annually, led by rising utility prices and labor costs. Despite the uptick in CPI, weak economic growth is fueling market expectations for a Bank of England rate cut in August.

American Markets

The U.S. Dollar Index extended its climb, with Tuesday’s 0.6% rise marking the strongest gain in nearly a month. It hasn’t seen a daily decline since July 2, supported by rising U.S. interest rates and expectations of elevated year-end Fed fund rates. The index has now moved beyond its key technical target and is trading in a tight range today. June’s industrial production is expected to show a modest 0.1% rebound after May’s drop. While consumer prices rose, producer prices are projected to ease slightly. The Beige Book is also due today but is unlikely to influence markets much given low odds of a rate change. Stronger earnings from large banks may benefit from a softer dollar, enhancing the value of foreign income.