Recent weak US economic data and dovish comments from Federal Reserve officials have increased expectations for US rate cuts in late 2025, while the ECB, after eight rate reductions, suggests its easing cycle may slow as euro-area inflation nears 2% and unemployment stays low. ECB President Christine Lagarde emphasized a flexible, data-driven approach to policy amid high uncertainty, noting that a weaker dollar due to US policies could bolster the euro. Germany’s June IFO Business Climate index, expected to rise slightly to 88.0, may signal a gradual economic recovery, though businesses remain cautious, and any setback could heighten calls for more policy support.

Rising oil prices, triggered by U.S. strikes on Iranian nuclear sites, have hit Japan’s economy hard, as the country relies heavily on Middle Eastern energy imports, dampening expectations for Bank of Japan rate hikes. For the yen to rebound, Japan needs a favorable U.S.-Japan trade deal and a significant drop in oil prices, which already seems like it’s happening with reports of Iran agreeing to a U.S.-proposed ceasefire. Japan’s tariff negotiator, Ryosei Akazawa, is set to visit the U.S. on June 26 to discuss tariffs on Japanese automobiles, potentially boosting yen optimism. Meanwhile, a recent 20-year Japanese Government Bond auction showed solid demand with a bid-to-cover ratio of 3.11, though market concerns linger about upcoming longer-term bond sales due to the Ministry of Finance’s plans to cut debt issuance.

Iran’s missile attack on a Qatar airbase was intercepted, with no casualties, prompting Trump to thank Iran for the early warning and urge both Iran and Israel toward peace, signaling potential de-escalation. If the Israel-Iran conflict remains contained or shifts to diplomacy, markets may refocus on trade uncertainties, U.S. fiscal concerns, and capital rotation, likely resuming the dollar’s downtrend and supporting antipodean currencies like the Australian dollar. Australia’s May CPI is expected to ease to 2.3% from 2.4%, within the RBA’s 2-3% target, influencing the July rate decision with an 84% chance of a rate cut, though some economists suggest the RBA can remain patient due to low unemployment and inflation within target.