Investors are also focused on the Federal Reserve’s policy decision at 20:00 (GMT+2) today. Despite mounting global uncertainty and political pressure from President Donald Trump, most analysts expect the federal funds rate to remain at 4.25–4.50%. According to CME’s FedWatch Tool, the probability of a rate cut in September is 56.4%.

Eurozone

The euro is strengthening against the pound and dollar, but losing ground to the yen. The positive trend is underpinned by inflation data: the consumer price index (CPI) for May remained flat month-over-month and decelerated from 2.2% to 1.9% year-over-year. Core inflation, excluding food and energy, slowed from 2.7% to 2.3%—still above the ECB’s 2.0% target.

ECB President Christine Lagarde has recently cautioned against excessive disinflation, arguing that the central bank should pause rate adjustments to allow inflation to stabilize. In light of the latest data, policymakers may reconsider dovish positions.

United Kingdom

The pound is weakening against both the euro and yen but is appreciating versus the dollar. While not a top safe haven in the current geopolitical climate, the pound is supported by resilient domestic macro data. In May, monthly CPI dropped from 1.2% to 0.2% as expected; annual inflation eased from 3.5% to 3.4% (versus a 3.3% consensus), and core inflation slowed from 3.8% to 3.5%.

Tomorrow at 13:00 (GMT+2), the Bank of England will announce its latest monetary policy decision. Despite dovish voices among policymakers, the data may prompt seven out of nine committee members to support holding the benchmark rate at 4.25%.

Japan

The yen is gaining across the board—appreciating versus the pound, euro, and dollar. Heightened geopolitical risks and the Bank of Japan’s decision to maintain its policy rate at 0.50% reinforce the yen and Swiss franc as prime alternatives to gold for risk-averse investors.

Weak macro data, however, continues to weigh on Japan’s outlook. May exports reversed from 2.0% growth to a 1.7% decline, while imports fell sharply from -2.2% to -7.7%, ballooning the trade deficit from ¥115.6 billion to ¥637.6 billion.

Australia

The Australian dollar is falling against the yen, euro, and pound, but rising against the US dollar. Markets are anticipating tomorrow’s labor market report at 03:30 (GMT+2): forecasts suggest unemployment will remain at 4.1%, while job creation is expected to slow from 89,000 to just 19,900. The participation rate should hold at 67.1%. These figures may prompt the Reserve Bank of Australia to cut its policy rate from 3.85% to 3.60% at the July 8 meeting, as the current rate restricts liquidity.

With AUD/USD as the base currency, long swap rates are negative, limiting appetite for long-term institutional investments.

Oil

Oil prices are attempting to reclaim the $75.00 mark amid renewed geopolitical risk in the Middle East. According to The Washington Post, Israeli airstrikes destroyed fuel storage tanks in Shahr-e Rey, just south of Tehran—one of the country’s largest supply hubs. As the threat of global supply disruptions rises, oil prices remain well supported.

Additionally, the American Petroleum Institute (API) reported a massive drawdown in US oil inventories, with stocks dropping by 10.133 million barrels—the largest weekly decline since August 2023 and the fourth straight weekly decrease. Should the US Energy Information Administration (EIA) confirm a further reduction in inventories at 16:30 (GMT+2), a fresh spike in crude prices may follow.