Eurozone inflation fell to 1.9% in May, below the expected 2.0% and down from 2.2% in April, driven by a significant drop in services inflation from 4% to 3.2%. Core inflation also eased to 2.3%, supporting expectations of an ECB deposit rate cut to 2% at its next meeting, with another potential cut later this year. Despite these cuts, the euro’s strength against the dollar is likely to persist due to factors like de-dollarization and U.S. fiscal concerns.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi noted that no reminder letter was received from the U.S. Trade Representative, suggesting possible U.S. satisfaction with Japan’s stance, as Japan holds firm for a comprehensive tariff deal ahead of elections. The Bank of Japan has increased provisions for bond transaction losses to 100%, signaling expectations of higher interest rates and a shift from ultra-loose monetary policy, which could strengthen the yen. However, BOJ Governor Ueda and former board member Sakurai indicated that rising JGB yields and trade uncertainties, particularly from U.S. tariffs, may delay rate hikes until late 2025, with the BOJ likely to pause bond purchase reductions if yields surge. Recent data shows Japan’s PMI Composite and Services indices revised upward to 50.2 and 51.0, respectively, for May.

The Australian dollar is attempting to hold gains above its 200-day moving average amid broad U.S. dollar weakness, but caution prevails due to China’s Caixin Manufacturing PMI slipping into contraction and dovish RBA minutes suggesting a potential 50bps rate cut as a safeguard against global trade risks. Australia’s Q1 GDP grew by just 0.2% quarter-on-quarter, below the expected 0.4%, signaling vulnerability to global trade tensions and geopolitical risks. The OECD warns of a potential global economic stall due to U.S. tariff hikes, increasing speculation that the RBA may cut rates at its July meeting.