France’s May inflation rate dropped to 0.7% (0.6% EU harmonized), signaling cooling price pressures, with Germany, Spain, and Italy expected to report inflation at or below the ECB’s 2% target on Friday, a rare occurrence since 2021. This trend, driven by a strong euro, falling energy costs, and easing wage pressures, supports expectations for an ECB rate cut on June 5 to stimulate growth, especially amid risks like potential U.S. tariffs on EU imports. EU trade chief Maros Sefcovic is leading negotiations to avoid trade conflicts, while Eurozone CPI expectations and German unemployment data, expected to show modest changes, are due today.

Japan’s Ministry of Finance surveyed banks and investors about demand for long-term government bonds, hinting at reduced issuance, which caused 30- and 40-year JGB yields to drop sharply, weakened the yen by over 1%, and spurred buying in U.S. Treasuries. Bank of Japan Governor Ueda signaled potential rate hikes if the economy improves, supported by April’s core inflation rising to 3.5% year-on-year, with May’s Tokyo CPI expected to show further price pressures. Japan’s trade negotiator aims to resolve U.S. tariff talks before the G7 summit (June 15–17), and a deal avoiding 25% auto tariffs could boost Japan’s economy and yen long-term, potentially enabling a BOJ rate hike in July, though markets remain skeptical, pricing in minimal hikes for 2025.

There have been more calls for a stronger Australian dollar against the U.S. dollar, driven by Australia’s better economic growth outlook, which isn’t fully priced into the Aussie’s recent slight gains. Australia’s April CPI stayed at 2.4% year-on-year, above the expected 2.3%, with trimmed mean CPI at 2.8%, signaling steady inflation that may delay RBA rate cuts. The RBA is expected to hold rates in July, with a possible cut in August, and banks predict a year-end cash rate of 3.10%–3.35%.