The Euro paused its recent gains against the US dollar after disappointing German economic data raised concerns about the Eurozone’s largest economy. Weak industrial production and a shrinking trade surplus suggest Germany’s manufacturing sector faces structural challenges, potentially keeping the economy near recession through Q3 2025. While the ECB is expected to hold rates steady in September, markets anticipate a Federal Reserve rate cut, which could support the Euro due to diverging central bank policies. Analysts warn that Germany’s economic struggles may lead to downward GDP revisions and increased calls for fiscal support, with markets closely watching upcoming data for signs of recovery.

The recent auction of 30-year Japanese Government Bonds showed average demand, easing concerns about long-term debt and giving the Bank of Japan room to continue reducing bond purchases, which may support the yen. However, new U.S. tariffs, stacked on top of existing ones, have raised trade uncertainties, particularly impacting Japan’s beef exports, now facing a 41.4% tariff rate, and potentially affecting automobiles. Japan’s Chief Negotiator Ryosei Akazawa is seeking clarification from the U.S. to resolve the tariff issue, which the BOJ cites as a barrier to policy normalization, with a potential rate hike expected in October. Prime Minister Ishiba faces criticism for the trade deal’s implementation, and while he resists resignation, internal Liberal Democratic Party tensions and a pending election review could lead to leadership changes by late August.

The Chinese yuan strengthened to its highest level since November 2024, boosting the Australian Dollar. China’s July trade data showed robust export growth of 12.4%, despite weaker U.S. shipments, as exporters diversified to non-U.S. markets. In Australia, a strong trade surplus of A$5.365 billion in June, driven by a 6% export surge, supports economic growth despite softer domestic demand. The Reserve Bank of Australia is expected to cut rates in August, with inflation at 2.1% and unemployment rising to 4.3%, signaling room for easing, though the RBA will likely remain cautious, with further cuts depending on weaker economic data.