ECB’s Makhlouf predicts a long-term decline in the US dollar’s dominance but notes the euro isn’t ready to replace it due to Europe’s lack of financial and economic integration. He attributes the euro’s recent rise against the dollar to concerns about US rule of law, not euro strength, and urges Europe to enhance its security, market integration, and sovereignty. This week, focus is on whether the EU and US can agree on a trade framework before the July 9 deadline to avoid 50% tariffs on EU exports, with Bloomberg estimating a 0.3-1.4% GDP hit to the euro area depending on tariff scenarios. Optimism persists for a deal, as both sides aim to avoid a trade war, with the EU open to a 10% tariff and the US extending negotiations until August 1.

Japan’s household spending in May surged 4.7%, exceeding expectations and marking the strongest growth since 2022, potentially bolstering the economy against U.S. tariff impacts and supporting the Bank of Japan’s case for future rate hikes. Despite this, concerns linger due to volatile data, a sharp -2.9% drop in real wages, and a modest 1% rise in nominal wages, casting doubts on sustained consumption strength. However, stable full-time worker wages, up 2.4% for 21 months, signal solid underlying trends, though a favorable trade deal may be crucial for the BOJ to confidently resume rate hikes amidst U.S. policy uncertainties.

Australia’s May spending data showed mixed signals: cautious consumer spending in retail but a surge in discretionary household spending across various categories. This may reduce the urgency for immediate aggressive rate cuts by the Reserve Bank of Australia, which might wait for Q2 inflation data before deciding on further rate reductions. While markets expect a second rate cut in July to lower the cash rate to 3.6% and anticipate a terminal rate of 3.1% (or even 2.85% by some economists), one large US bank predicts the RBA will pause, citing stable inflation near the 2-3% target, a tight jobs market, expected economic growth, and a stable Chinese yuan. Upcoming ANZ-Indeed Job Advertisements data will provide further economic insights.