A recent OMFIF report forecasts that 16% of central banks will increase euro holdings in the next 12-24 months, potentially raising the euro’s global reserve share to 25% by decade’s end, driven by EU bond market expansion and rising demand in cross-currency swaps, which could make borrowing in euros costlier than dollars. Dovish Fed signals from Waller and Bowman, alongside weak U.S. data, boost expectations for 2025 rate cuts, while the ECB nears the end of its easing cycle with inflation near 2%, supporting EURUSD strength. Germany’s plan to borrow €118.5 billion in 2025 for public and military spending signals sustained fiscal stimulus, further bolstering the euro. Upcoming German Gfk Consumer Confidence data, expected to rise to -19.2, reflects cautious optimism but remains sensitive to geopolitical or economic shocks.

The Yen is recovering as oil prices ease following a ceasefire between Israel and Iran, reducing pressure on Japan’s energy-dependent economy after U.S. strikes on Iranian nuclear sites had driven oil higher. Dovish comments from Fed officials Waller and Bowman, hinting at a possible July rate cut, have weakened the USDJPY pair, while Japan’s tariff negotiator prepares for U.S. talks on June 26, aiming to secure a favorable trade deal to support BOJ rate hike expectations. BOJ’s Tamura advocates for decisive rate hikes if inflation risks rise, with Tokyo’s June CPI data on June 26 potentially adding pressure for action, as May’s PPI Services at 3.3% signals persistent domestic inflation. Declining department store sales (-7.0% YoY nationwide, -9.1% in Tokyo) highlight retail challenges, but markets expect tariff uncertainties to stabilize as Trump focuses on economic stimulus, potentially extending tariff deadlines.

The Australian dollar is regaining ground, tracking the Chinese yuan’s strength (fixed at 7.1656, its highest since November), as Trump’s Israel-Iran ceasefire reduces the dollar’s geopolitical risk premium. Australia’s May CPI fell to 2.1%, below the expected 2.3%, with trimmed mean CPI dropping to 2.4% from 2.8%, signaling easing inflation pressures and increasing the likelihood of an RBA rate cut on July 8. Markets now await early July retail sales and household spending data, where weak figures could confirm the case for monetary easing.