Former President Trump has shifted toward Russia’s position in the Ukraine conflict, urging President Zelensky to accept a peace deal that involves conceding Crimea and abandoning NATO aspirations, while placing the burden of failed talks on Ukraine. With the U.S. holding key leverage through military aid, Ukraine faces pressure to agree to terms favoring Russia, which could set a precedent that might makes right but may also lower energy prices, benefiting the euro in the short term. Meanwhile, disappointing Eurozone trade data signals potential economic challenges, though recovery is expected, and divergent monetary policies between the ECB and the Fed could support a stronger euro through 2026.

Japan’s Q2 GDP growth bolsters its economic recovery and supports the Bank of Japan’s cautious move toward tighter monetary policy, with markets anticipating a potential rate hike in October if inflation remains high. Prime Minister Shigeru Ishiba, despite political setbacks, aims to leverage the positive economic data to strengthen his position. Rising US-Japan yield spreads and comments from US Treasury Secretary Bessent urging Japan to control inflation are supporting the yen, while upcoming July CPI data, expected to show inflation above 2%, could further fuel expectations for a BOJ rate hike.

Analysts expect the Reserve Bank of Australia to cautiously continue its gradual rate-cutting cycle, with the big four banks forecasting the Official Cash Rate to drop to 3.35% by the end of 2025, likely starting in November 2024 and possibly followed by another cut in early 2026, depending on inflation (2%-3%) and unemployment (4.3%-4.5%). The RBA’s cautious approach contrasts with a more dovish outlook for the U.S. Federal Reserve, which markets expect to cut rates by 53 basis points by year-end, compared to 36 basis points for the RBA, potentially supporting the Australian Dollar. Federal Reserve Chair Powell’s upcoming Jackson Hole speech and U.S. PMI data on August 21 could significantly influence Aussie, alongside Australian consumer confidence data.