The euro has surpassed the key 1.17 level, with bank strategists forecasting a rise to 1.20 or even 1.23 by year-end, driven by faster U.S. interest rate declines compared to other G10 nations. NATO leaders have agreed to increase defense spending to 5% of GDP by 2035, a historic shift from 2%, prompted by Russian threats, with Germany aiming to lead Europe’s military buildup. This deal, a win for both President Trump and European leaders, signals greater European unity and strategic autonomy, potentially boosting the euro’s value and reserve currency status, though concerns remain about crowding out private investment and rising public debt. Germany’s Gfk Consumer Confidence Index is expected to improve slightly to -19.2 in July from -19.9, reflecting fragile economic optimism that could be disrupted by trade or geopolitical tensions.

Bank of Japan Board member Naoki Tamura indicated that the central bank might need to raise interest rates decisively if inflation risks increase, potentially achieving price stability sooner than anticipated due to stronger-than-expected inflation data. Despite these risks, the BOJ plans to maintain its current monetary policy due to economic uncertainties, including U.S. tariffs and Middle East tensions. Tamura noted a low but non-zero chance of a rate hike during ongoing U.S.-Japan trade talks, which focus on U.S. tariffs on Japanese automobiles, with Japan emphasizing its significant investments and job creation in the U.S. A favorable trade deal could strengthen the Yen and support BOJ’s policy normalization, while upcoming data, including a steady 2.5% jobless rate and a slightly softer Tokyo CPI of 3.3%, reflects a tight labor market and persistent inflationary pressures, keeping the BOJ on track for monetary normalization.

Australia’s economy is projected to grow by 1.7% in 2025, 2.3% in 2026, and 2.5% in 2027, according to a Bloomberg survey of economists. Inflation is expected to remain steady at 2.5% in 2025 and 2.7% in 2026, with May 2025 inflation at 2.1%, below the consensus of 2.3%. The Reserve Bank of Australia’s interest rate is forecasted to reach 3.60% by Q3 2025, and upcoming retail sales and household spending data could influence a potential rate cut at the RBA’s July 8 meeting. Job vacancies rose 2.9% in the three months to May 2025, a significant improvement from the prior quarter’s -4.3%, though they remain 28.5% below their May 2022 peak, signaling cautious optimism in the labor market.