The euro is trying to hold up after five straight days of declines. Recent data showed a renewed rise in eurozone inflation, led by Germany, pointing to stronger price pressures, while growth indicators weakened, with softer confidence and slower retail sales suggesting cooling demand. This mix highlights a stagflationary backdrop, a risk also flagged by ECB Stournaras, who warned that escalating Middle East tensions could trigger an energy shock and further complicate the outlook. Overall, while higher inflation may make the ECB more cautious on rate cuts, weak growth, rising energy costs, and a stronger dollar continue to weigh on the euro.

The Yen has pared earlier gains, with USDJPY still hovering near the 160 level—a zone closely watched for potential intervention by Japanese authorities. Recent Tokyo inflation data showed easing price pressures, with both headline and core CPI remaining below the BoJ’s 2% target, while softer retail sales and industrial production point to weakening domestic demand. Labor market conditions remain relatively stable, but overall, the data suggest a mixed economic backdrop that reduces pressure on the Bank of Japan to tighten policy more aggressively.

The Australian dollar remains under pressure near a two-month low, weighed down by heightened geopolitical tensions and a stronger US dollar. Recent RBA minutes highlight a central bank still focused on fighting inflation, delivering another rate hike and signaling more could follow as price pressures—partly driven by energy risks—and tight labor markets persist, even as consumer demand shows signs of strain. Meanwhile, credit data points to resilience, with lending activity stabilizing and picking up modestly despite higher borrowing costs.