The euro paused its four-day rise, shifting to retreat mode as Middle East tensions boosted demand for the US dollar. However, the dollar’s gains may be capped by President Trump’s expanded steel tariffs on household appliances and lower-than-expected CPI and PPI reports, which support expectations for Federal Reserve rate cuts. Investors are now focused on upcoming CPI data from Europe, an ECB speech, and the Michigan Consumer Sentiment report for further economic insights.

The yen initially surged against the dollar following news of an Israeli attack, with its safe-haven status bolstered by geopolitical tensions and potential Iranian retaliation. President Trump’s tariff threats add to market uncertainty, further supporting the yen and driving Japanese bond yields lower, with the 10-year yield hitting 1.4%. Japanese stock indices, Nikkei 225 and Topix, fell over 1%, reflecting broader market unease, while BOJ Governor Ueda maintained a hawkish stance, signaling potential rate hikes if inflation neared 2%.

Financial markets in Australia faced significant turmoil today following Israel’s unexpected attack on Iranian nuclear sites, prompting a widespread sell-off of risky assets. The Australian dollar plummeted, erasing recent gains, as fears of Iranian retaliation and escalating Middle East tensions gripped investors. Adding to the uncertainty, renewed U.S. tariff threats under Trump, including a proposed 50% steel duty hike by June 23, further rattled Australia’s export-driven economy. In response, investors sought safety, driving 10-year ACGB yields down to the lowest levels since May. Compounding the unease, weak GDP data and speculation of an 80% chance of an RBA rate cut next month, potentially lowering rates to 3.10% by year-end, signal a rapidly cooling economy.