The US dollar is showing modest weakness against most G10 currencies, except the Scandinavian ones, as markets anticipate the upcoming US CPI data. Many emerging market currencies are also gaining ground. Despite recent inflation reports coming in softer than forecasted, analysts continue to expect rising price pressures. In trade developments, the US imposed a 17% tariff on Mexican tomato imports, while showing signs of easing restrictions on Nvidia's chip sales to China. Chinese tech stocks benefited, although the broader Chinese index saw only minor improvement. Global yields are mostly down slightly, and commodities like gold and oil show mixed movements.

Asia Pacific Markets

In Asia, the Japanese yen remained relatively soft, supported by firm US Treasury yields. The dollar briefly neared its highest levels since late June, although momentum faded. Japanese long-term bond yields climbed sharply, especially at the 30- and 40-year ends, outpacing US gains and signaling rising inflation expectations.
In Australia, the local dollar retreated after reaching a yearly high near $0.6595 last week. Weak follow-through selling kept it above the $0.6485 level, a key support. Market sentiment was influenced by interest rate projections, which rose late last week but have slightly corrected since then.

European Markets

The euro approached the $1.17 mark in all trading sessions yesterday but later declined to around $1.1660 as investors unwound long positions. It managed a slight rebound today but hasn’t reclaimed the $1.17 level. Stronger-than-expected Eurozone industrial production in May suggests growth driven by infrastructure and defense investments. Germany's ZEW investor sentiment survey also indicated improving confidence.
Meanwhile, the British pound has experienced a seven-day losing streak, nearing its lowest since late June. However, it found some support today, with traders closely watching the upcoming UK CPI release, expected to hold inflation steady at 3.4%.

American Markets

The US dollar index continued its upward trend yesterday, marking a strong run since early July. Supporting this strength is the rising year-end implied Fed funds rate, now around 3.84%, the highest in nearly a month. The dollar index may face resistance around 98.25, while near-term support is seen between 97.50 and 97.70. The key focus is the upcoming June CPI report, projected to show a 0.3% monthly increase in both headline and core inflation. This would reinforce concerns within the Fed, which remains cautious, and may further reduce the odds of a rate cut in September.