The recent decline in the US dollar, initially sparked by President Trump's criticism of the Federal Reserve on June 23, appears to have come to a halt. This stabilization is likely supported by stronger-than-expected economic data and rising US interest rates. As Treasury yields move higher, the dollar is strengthening against most major currencies. While the Canadian dollar has remained relatively stable, the yen has seen the sharpest decline among G10 currencies. Concerns over US-Japan trade tensions, particularly around rice imports, are adding to market anxiety. Most emerging market currencies are under pressure, although Taiwan’s dollar is rising due to increased exports and equity inflows. Meanwhile, the Hong Kong Monetary Authority stepped in to curb the US dollar's gains, reflecting diverging regional currency dynamics.

Asia Pacific Markets

The Japanese yen has weakened further as US Treasury yields climb, helping the dollar inch past JPY144. A breakout above JPY144.75 could signal the end of the greenback’s recent downtrend. US tariff threats targeting Japan appear to be based on a misunderstanding, as Japan does import significant amounts of US rice. Despite speculation over a potential July rate hike from the Bank of Japan, markets remain skeptical, with minimal tightening priced in.
In Australia, the local dollar surged to an eight-month high before retreating. Recent economic indicators showed a rebound in building permits and retail sales. However, weaker household spending looms, and markets now expect an interest rate cut at the July 8 Reserve Bank of Australia meeting, with further easing anticipated by year-end.

European Markets

After reaching its strongest level since 2021, the euro faced selling pressure, slipping back before regaining some ground. Still, the currency's winning streak since mid-June looks vulnerable, with key support levels now in sight. Despite sluggish economic growth in the eurozone, the region’s jobless rate remains near historic lows at 6.3%, highlighting underlying labor market resilience.
In the UK, the pound rallied to highs not seen since October 2021, but soon reversed course amid political challenges. A controversial disability reform vote briefly stabilized the currency, yet ongoing fiscal uncertainty and revised lower growth projections by the Office for Budget Responsibility are clouding the outlook for Chancellor Reeves and the broader UK economy.

American Markets

The US dollar is showing signs of a rebound, driven by solid economic data, warnings from Fed Chair Powell about inflation, and rising Treasury yields. The Dollar Index recovered from recent lows but remains under 97.00, with key resistance levels still ahead. Labor market data remains the central focus, as mixed signals emerge. While manufacturing employment weakened, job openings exceeded expectations in May, particularly in the food and accommodation sectors, possibly due to declining immigration. Today’s market attention turns to private-sector employment figures from ADP. The ADP data has so far tracked closely with government estimates, and tomorrow's report is expected to indicate a cooling labor market and a slight uptick in unemployment.