June producer inflation data were published in the United States yesterday. On a monthly basis, the Producer Price Index fell from 0.6% to –0.3%, compared with expectations of 0.0%. The core indicator increased from 0.1% to 0.2% but remained below the forecast of 0.3%. On an annual basis, the Producer Price Index declined from 6.0% to 5.5%, instead of rising to the expected 6.2%. The core rate increased from 4.6% to 4.7% but was significantly below the forecast of 5.2%. Thus, both consumer and wholesale inflation in the US economy are slowing considerably, although they remain above the Federal Reserve’s 2.0% target. This reduces the likelihood of another monetary policy tightening in the near term but does not rule it out before the end of the year. According to the CME FedWatch Tool, traders now estimate the probability of a September rate increase at less than 20%, while the likelihood of policy tightening in December stands at 73%. Recent comments from Federal Reserve officials are also worth noting. Fed Governor Lisa Cook said yesterday that the regulator could now wait and observe how the situation develops, although inflation risks associated with the boom in artificial intelligence investment and the US–Iran conflict remain. Meanwhile, New York Fed President John Williams suggested that the current sharp increase in prices may have reached its peak and could begin to slow gradually over the coming quarters.
Eurozone
The euro is weakening moderately against the US dollar today but strengthening against the pound and yen.
In the absence of major economic releases, the euro’s movement is largely being driven by external factors. It is worth noting the results of a Reuters survey of leading economists regarding the European Central Bank’s next steps. Most respondents believe the regulator will leave interest rates unchanged at its July 23 meeting but raise them for the second time this year in September, as renewed growth in energy prices increases the risk of stronger inflationary pressure. European officials may tighten monetary policy twice before the end of the year. Economists also expect inflation to remain relatively elevated over the medium term and not return to the ECB’s 2.0% target before the second quarter of 2027.
United Kingdom
The British pound is weakening moderately against its main rivals today, including the euro, yen and US dollar.
May GDP data for the United Kingdom were published today. The economy expanded by 0.1% month-on-month after contracting by 0.1% in April. Over the three-month period from March to May, growth reached 0.7%, compared with the forecast of 0.5%. On an annual basis, GDP growth accelerated from 1.1% to 1.3%. Experts note that economic growth in the United Kingdom remains relatively resilient due to the expansion of the services sector, led by programming and advertising. At the same time, today’s data on industrial production and construction activity for May were weaker than expected. Industrial output declined by 0.5% month-on-month after rising by 0.2% in April. On an annual basis, production increased by 1.0%, falling short of the projected 1.2%. Construction output declined by 0.8% month-on-month, considerably more than the expected 0.3% fall. On an annual basis, it contracted by 1.8%, compared with the forecast decline of 1.1%.
Japan
The Japanese yen is weakening moderately against the US dollar and euro today but strengthening against the pound.
The Bank of Japan published its quarterly report on inflation expectations today. The survey showed that the share of households expecting prices to rise over the next 12 months increased from 83.7% to 90.4%, the highest level since records began. Moreover, the proportion of respondents expecting a significant increase in consumer prices over the next five years rose from 82.6% to 86.1%. Average expected price growth over the coming year increased to 13.1% from the previous estimate of 11.4%. Experts note that household inflation expectations are generally higher than actual inflation. Nevertheless, consumers are actively preparing for a higher cost of living as the US–Iran conflict and the weaker yen push up fuel and import prices. These figures increase the likelihood that the Bank of Japan will continue tightening monetary policy in the near term.
Australia
The Australian dollar is strengthening against the pound today while showing mixed dynamics against the euro, yen and US dollar.
July data on inflation expectations in the Australian economy were published today. Instead of remaining unchanged at 5.5% as expected, the indicator fell to 4.7%, its lowest level since the beginning of the year. Nevertheless, most market participants expect inflation to remain above the Reserve Bank of Australia’s target range of 2.0–3.0%, leaving policymakers room for further monetary policy tightening over the medium term.
Oil
Oil prices continue to make moderate attempts to rise today.
Prices remain supported by the worsening geopolitical situation in the Middle East. Yesterday, US President Donald Trump pledged to expand attacks on Iran’s energy infrastructure from next week. In response, Iranian authorities announced retaliatory measures, including attacks on key US facilities in the Middle East and a blockade of the Bab el-Mandeb Strait, which could extend oil and gas delivery times to major consumers by several weeks. Additional support comes from the weekly US petroleum inventories report published by the Energy Information Administration (EIA) yesterday. The data confirmed another decline in crude oil stocks of 1.692 million barrels. Gasoline inventories also fell by 1.533 million barrels, while distillate stocks increased sharply by 4.556 million barrels.
