Global markets are experiencing heightened volatility following a series of geopolitical and economic developments. The collapse of the US-China trade deal, and a sharp increase in US tariffs on steel and aluminum have caused broad declines in stocks, bonds, and the US dollar. All G10 currencies appreciated, with Scandinavian currencies gaining over 1%. While the Canadian dollar lagged slightly, it still hit new annual highs. Emerging market currencies mostly followed suit. 

Asia Pacific Markets

The Japanese yen found support from Tokyo’s latest inflation data, helping extend its recent rebound. Despite rising US yields, the dollar weakened against the yen, falling to around JPY142.75. A key technical trendline lies just below, offering further support. Meanwhile, Japan’s capital spending remained solid, though its manufacturing PMI still lingers below the 50-mark, indicating continued contraction.
In Australia, the local dollar hovered near its yearly high after a strong showing earlier last week. Although the May manufacturing PMI was revised slightly lower to 51.0, it remains among the highest in developed markets, suggesting solid industrial momentum.

European Markets

In the eurozone, the single currency pushed higher, surpassing $1.1440 for the first time since early May, even though the final manufacturing PMI held steady at 49.4. This marked a fifth monthly improvement, though the reading remains below the expansion threshold. The focus now shifts to the ECB’s expected rate cut on Thursday, with markets pricing in a quarter-point reduction.
In the UK, the pound maintained strength above $1.3550 after reaching a three-year high. The May PMI was revised up but remained subdued at 46.4. Investors are watching for signals from the Bank of England ahead of its June meeting.

American Markets

The US dollar continues to face downward pressure amid increasing trade tensions with China and a lack of fresh support from economic data. President Trump’s decision to double tariffs on steel and aluminum to 50% has deepened friction with Beijing. While today’s PMI and ISM manufacturing figures are unlikely to shift policy direction, attention turns to Fed Chair Powell’s upcoming speech. With labor data remaining central to the Fed’s outlook, the market has delayed expectations for the next rate cut to the fourth quarter. Investors will scrutinize Friday’s jobs report, especially any uptick in the unemployment rate.