The European Central Bank is unlikely to cut interest rates further soon, with outgoing Governing Council member Robert Holzmann suggesting rates are appropriately set and the bank should monitor global economic developments, particularly U.S. tariffs. ECB President Lagarde emphasized a data-dependent approach, and while recent Eurozone data shows resilient consumer demand with strong retail sales, Germany’s factory orders disappointed, though revisions may occur. Market expectations lean toward minimal ECB rate cuts this year, potentially one in December, while U.S. Federal Reserve policy divergence and concerns over manipulated U.S. economic data could influence the EURUSD exchange rate.

Confusion surrounds a U.S.-Japan trade deal, with the U.S. clarifying that a 15% tariff will apply to all Japanese exports, contrary to Japan’s expectation that only goods below 15% would be affected, potentially escalating trade tensions. Japan’s markets are focused on a 30-year JGB auction, where a weak outcome could raise concerns about fiscal expansion and hinder yen recovery. Taro Kono, a ruling party member, echoed calls for tighter monetary policy to strengthen the yen, urging the Bank of Japan to raise rates while criticizing past economic policies. A government panel proposed a record 6% minimum wage hike to JPY 1,118, signaling a robust wage-price cycle that supports BOJ’s confidence in potential rate hikes. Despite nominal wages rising 2.5% in June, real earnings fell 1.3% due to inflation, though wage data supports BOJ’s outlook. Political uncertainty looms as the Liberal Democratic Party meets to review its electoral loss, with potential leadership changes possibly impacting BOJ policy expectations and yen volatility.

Australian household spending grew 4.8% year-over-year in June, driven by sectors like clothing and recreation, but monthly growth slowed to 0.5%, below expectations, amid rising household costs and fading post-rate cut effects. Bloomberg Economics warns that cooling migration and high household debt could weaken spending momentum, despite Australia facing lower tariffs. Markets anticipate at least two RBA rate cuts in 2025, but analysts, including former RBA executive Jonathan Kearns, expect a cautious approach, with cuts likely in August and November, contingent on economic data, particularly unemployment trends.