EU Economy Commissioner Valdis Dombrovskis reported progress in intensive EU-US trade talks, dismissing speculation of a 10% reciprocal tariff as inaccurate. With a July 9 deadline approaching, failure to reach an agreement could escalate tariffs to 50%, amid existing high tariffs on steel, aluminum, and automobiles causing disruptions for European automakers. Key issues include U.S. demands for changes to EU tech regulations and the EU’s opposition to sector-specific tariffs, with further U.S. investigations into pharmaceuticals and other industries adding complexity. The EU is prepared to impose retaliatory tariffs targeting key U.S. states if talks fail, while IMF’s Kristalina Georgieva sees an opportunity for the euro to grow as a global currency, despite challenges like regulatory fragmentation and high energy costs, which she believes Europe can overcome.

Japanese government bond prices rose on Thursday due to strong demand at a five-year bond auction, fueled by expectations that the Ministry of Finance might reduce longer-term debt issuance and fading hopes for a Bank of Japan rate hike. The 10-year JGB yield fell to 1.42%, while Japanese investors may continue seeking higher yields abroad, pressuring the yen. However, May’s core inflation at 3.7%, higher than the expected 3.6%, marked three months of rising prices, driven by service inflation, wage growth, and potential oil price spikes from the Israel-Iran conflict. With U.S.-Japan trade talks and a July 9 tariff deadline approaching, persistent inflation could push the BOJ toward a rate hike in July or September, depending on trade outcomes.