InvestMacro

The US stock indices did not trade yesterday due to a public holiday.

The Mexican peso (MXN) weakened to 19.1 per US dollar, down from a ten-month high of 18.886 reached on June 12, as the US dollar regained strength amid expectations of easing by the Bank of Mexico and renewed geopolitical risks. The US Federal Reserve’s decision to keep rates at 4.25–4.50% and Chairman Powell’s warning that US tariffs could cause inflation boosted demand for dollars. At the same time, markets began to price in an earlier-than-expected rate cut by the Bank of Mexico, even though Mexico’s benchmark rate remains at 8.5%, which negates the carry premium that had been supporting the peso.

European stock markets were mostly down on Thursday. Germany’s DAX (DE40) fell by 1.12%, France’s CAC 40 (FR40) closed down 1.34%, Spain’s IBEX35 (ES35) lost 1.28%, and the British FTSE 100 (UK100) closed down 0.58%.

At its June meeting, the Bank of England (BoE) voted 6-3 to keep the bank rate at 4.25%, focusing on the complex backdrop of heightened global uncertainty and persistent inflationary pressures. Three members of the bank voted to cut the rate by 0.25 percentage points to 4%, although investors had expected the split to be 7–2. The Central Bank noted that consumer price inflation is likely to remain broadly at current levels until the end of the year and return to target next year.

The Swiss National Bank (SNB) lowered its key interest rate by 25 basis points to 0% in June 2025, as expected, setting the cost of borrowing at zero for the first time since the introduction of negative rates at the end of 2022. This decision was made against the backdrop of easing inflationary pressures and a deterioration in the global economic outlook. Consumer prices in Switzerland fell by 0.1% in May, the first decline in four years. The SNB currently expects average inflation of 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027. In the first quarter of 2025, Switzerland’s GDP also showed strong growth, partly driven by exports to the US ahead of the introduction of new tariffs, although the underlying momentum was more modest.

At its meeting in June 2025, Norges Bank lowered its key rate by 25 basis points to 4.25%. This is the first rate cut in five years. Policymakers said that inflation had slowed since the March meeting and that it was appropriate to ease financial conditions and support economic growth. However, the Monetary Policy Committee emphasized that borrowing costs should remain sufficiently tight to prevent a resurgence of inflation. According to the latest expectations, the rate will be around 4% at the end of the year and 3% by 2028.

WTI crude oil prices slowed their growth at the start of Thursday’s session and are trading below $75 per barrel, just slightly below their five-month high, after President Trump’s statement that he would decide on US involvement in the Israeli-Iranian conflict “within two weeks” allayed fears of an immediate supply shock from the Middle East.

Asian markets were in sell-off mode yesterday. Japan’s Nikkei 225 (JP225) fell by 1.02%, China’s FTSE China A50 (CHA50) lost 0.64%, Hong Kong’s Hang Seng (HK50) decreased by 1.99%, and Australia’s ASX 200 (AU200) showed a negative result of 0.09%.

The Philippine Central Bank cut its benchmark interest rate by 25 basis points to 5.25% at its June 2025 policy meeting, the lowest level in two and a half years and in line with market expectations. BSP Governor Eli Remolona said the decision reflected a more moderate inflation outlook and the need to support growth with a more accommodative policy. Annual inflation in May 2025 fell to 1.3% from 1.4% in the previous month, matching market expectations and reaching its lowest level since November 2019. The inflation projections for 2025 was revised downward from 2.4% to 1.6%, reflecting easing price pressures.

At the end of the trading day, the Dow Jones Index (US30) fell by 0.10%. The S&P 500 Index (US500) fell by 0.03%. The Nasdaq (US100) Technology Index closed higher by 0.01%. Investors reacted to the Federal Reserve’s decision to leave interest rates unchanged and Fed Chairman Powell’s cautious tone amid growing geopolitical and economic uncertainty. Powell emphasized the Fed’s wait-and-see stance, citing uncertainty about the inflationary impact of President Trump’s tariffs and the risk of stagflation. Officials expect two rate cuts in 2025 but lowered growth expectations and raised inflation expectations.

Initial jobless claims in the US fell by 5,000 from the previous week to 245,000 for the week ending June 14, in line with market expectations, but held on to recent gains and were the fifth-highest reading since August 2023. At the same time, the number of applications for unemployment benefits in the previous week was 1,945,000, remaining at a more than three-year high of 1,951,000 recorded in the last week of May. The results reinforced the view that the US labor market is softening after initially resisting the economic uncertainty this year.

Visa, Mastercard, and PayPal each fell more than 4% after Congress passed the stablecoin bill.

In June, the Canadian dollar weakened to 1.37 per US dollar, retreating from its strongest level in eight months of 1.357, recorded on June 16. Expectations of a divergence in monetary policy with the US, weaker commodity prices, and geopolitical safe-haven flows undermined its recent gains. Traders are now pricing in more aggressive easing by the Bank of Canada compared to the Fed, which is narrowing the yield differential and undermining the loonie’s advantage.

European stock markets traded mixed on Wednesday. Germany’s DAX (DE40) fell by 0.50%, France’s CAC 40 (FR40) closed down by 0.36%, the Spanish IBEX35 (ES35) rose by 0.08%, and the British FTSE 100 (UK100) closed positive 0.08%. The annual core inflation rate in the Eurozone, excluding energy, food, alcohol, and tobacco prices, fell to 2.3% in May 2025 from 2.7% in the previous month, which was in line with preliminary estimates and below the market’s initial expectations of 2.5%. Although this figure remained above the 2% target, it was the lowest since October 2021, reinforcing calls from dovish members of the European Central Bank’s Governing Council for monetary policy easing and addressing growth concerns.

Sweden’s Riksbank cut its key interest rate by 25 basis points to 2% in June, in line with expectations, as the country’s economic recovery slows and inflation declines. Recent data points to weak growth and persistently high unemployment. The future course of monetary policy will depend on new data and how it affects inflation and growth expectations.

WTI oil prices fell more than 1% to $73.7 per barrel on Wednesday after rising to $76 at the start of the session, as President Trump hinted at the possibility of dialogue with Iran, easing fears of an inevitable conflict. While tensions remain high amid ongoing Iranian-Israeli military action, Trump refused to confirm plans for a US strike and said Iran had come to the negotiating table, although he called it “very late”.

Asian markets traded without a single trend yesterday. Japan’s Nikkei 225 (JP225) rose by 0.90%, China’s FTSE China A50 (CHA50) added 0.07%, Hong Kong’s Hang Seng (HK50) fell by 1.12%, and Australia’s ASX 200 (AU200) showed a negative result of 0.12%.

On June 19, the Hong Kong Monetary Authority (HKMA) left its base rate unchanged at 4.75%, echoing the US Federal Reserve’s decision to keep its base rate at 4.25–4.50% for the fourth consecutive meeting, despite pressure from President Trump to lower rates. The HKMA’s policy remains in line with that of the Fed due to the Hong Kong dollar’s peg to the US currency.

Bank Indonesia kept its base interest rate unchanged at 5.5% at its June 2025 policy meeting, following a 25 bps cut in May, in line with market expectations. This decision was supported by lower inflation, stability in the rupiah exchange rate, and ongoing efforts to sustain economic growth. In May 2025, annual inflation fell to 1.60% from an eight-month high of 1.95% in April.

The Australian dollar fell to $0.648 on Thursday, reversing the previous session’s significant gains, after labor market data reinforced the Reserve Bank of Australia’s view that monetary policy needs to be eased. Markets now see an 80% chance that the RBA will cut its key interest rate from 3.85% to 3.6% at its July 8 meeting, with two more cuts expected later this year.

The US stocks fell on Tuesday as investors closely monitored escalating tensions in the Middle East, where the Israeli-Iranian conflict has been ongoing for five days. At the end of the trading day, the Dow Jones (US30) Index fell by 0.70%. The S&P 500 (US500) Index fell by 0.84%. The Nasdaq (US100) Technology Index closed lower by 0.91%. President Trump stepped up his rhetoric, demanding Iran’s “unconditional surrender” and warning of a possible strike against Supreme Leader Khamenei in a series of posts on the Truth social network.

At the same time, disappointing US retail sales data, which fell by 0.9% in May, signaled a slowdown in consumer growth, and that tariffs may have a huge impact on the economy.

Today, Federal Reserve officials will give their views on the future path of interest rates, as well as how tariffs and unrest in the Middle East will affect the economy. Although an immediate change in interest rates seems unlikely, the Fed meeting, which ends on Wednesday, will provide important signals that could still influence the markets. Among the most significant points to watch will be whether Federal Open Market Committee members stick to their previous expectations of two rate cuts this year.

Minutes from the meeting show that earlier this month, senior Bank of Canada officials considered the possibility of lowering interest rates. The main source of uncertainty — and the biggest threat facing the Canadian economy — is the trade conflict initiated by the United States. The Bank of Canada’s next interest rate decision is scheduled for July 30.

Stock markets in Europe were mostly lower on Tuesday. The German DAX (DE40) fell by 1.12%, the French CAC 40 (FR40) closed down 0.76%, the Spanish IBEX35 (ES35) lost 1.41%, and the British FTSE 100 (UK100) closed down 0.46%.

WTI oil prices rose by 4.3% to $74.8 per barrel on Tuesday as escalating tensions between the US and Iran reignited concerns about supplies. US President Donald Trump demanded Iran’s “unconditional surrender” and directly threatened Supreme Leader Ayatollah Ali Khamenei. According to Goldman Sachs, any attempt by Iran to block the Strait of Hormuz, a key point on the global oil supply route, could lead to a sharp rise in prices above $100.

On Wednesday, silver prices rose above $37.20 per ounce, reaching their highest level since 2012, driven by high industrial demand, persistent supply shortages, and increased purchases of the safe-haven metal amid geopolitical uncertainty. The expanding use of this metal in solar energy, electronics, and broader electrification trends now accounts for more than half of global demand, reinforcing its long-term structural importance. On the supply side, the silver market has been in deficit for the fifth consecutive year.

Asian markets traded without a single trend yesterday. Japan’s Nikkei 225 (JP225) rose by 0.59%, China’s FTSE China A50 (CHA50) added 0.01%, Hong Kong’s Hang Seng (HK50) fell by 0.34%, and the Australian ASX 200 (AU200) showed a negative result of 0.08%.

In New Zealand, attention this week is focused on the first quarter GDP report, which will be released on Thursday. Analysts expect the economy to expand by 0.7% on a quarterly basis but contract by 0.8% on an annual basis. On the policy front, the Reserve Bank of New Zealand has already signaled that its aggressive easing campaign is coming to an end, and markets are expecting a final rate cut later this year.

The Australian dollar strengthened to $0.649 on Wednesday, recouping some of the previous session’s losses, as rising oil prices caused by heightened geopolitical tensions supported demand for commodity-linked currencies. Market jitters intensified as the conflict between Israel and Iran entered its sixth day and President Trump demanded Iran’s unconditional surrender and hinted at possible US intervention. In response, oil prices continued to rise, supporting the Australian dollar, as it is strongly correlated with commodity markets.

At the end of Monday, the Dow Jones Industrial Average (US30) Index rose by 0.75%. The S&P 500 (US500) Index rose by 0.94%. The Nasdaq (US100) Technology Index closed higher by 1.42%. The US stocks rose on Monday as optimism about easing geopolitical tensions boosted investor sentiment, while attention shifted to the Federal Reserve’s decision on Wednesday, with markets widely expecting rates to remain unchanged. These reports reinforced hopes for an end to the Iran-Israel conflict, which led to lower oil prices and triggered a rise in risk appetite.

The US Federal Reserve will begin a two-day meeting on Tuesday, and interest rates are expected to remain unchanged at around 4.5% following the meeting on Wednesday. However, the main focus will be on whether the Central Bank will signal future rate cuts, especially given falling inflation in the US and signs of an economic slowdown. Until now, the Central Bank has largely maintained that interest rates will remain unchanged in the near term. However, weak inflation data in recent months, combined with signs of a cooling labor market and slowing economic growth, have fueled bets that the Fed may change its tone in the coming months.

The Mexican peso (MXN) strengthened to 18.90 per US dollar, its strongest level since August, amid a broad sell-off of the dollar and hawkish expectations regarding the Bank of Mexico. Domestically, an unexpected rise in core inflation to 4.42% in May prompted Bank of Mexico policymakers to advocate for a pause in the easing cycle, contingent on data, which bolstered support for the peso’s yield.

In June, the Canadian dollar (CAD) strengthened to 1.35 per US dollar, its strongest level in eight months, as a broad sell-off in the US dollar coincided with rising crude oil prices. The rise in oil prices directly increased Canada’s energy export revenues, which provided strong support for the loonie. Investors are also paying attention to the G7 summit, where coordinated measures will be taken to resolve global issues, from the Middle East and Ukraine to trade frictions, as well as a tense week of decisions by central banks.

European stock markets were mostly up on Monday. The German DAX (DE40) rose by 0.78%, the French CAC 40 (FR40) closed up 0.75%, the Spanish IBEX35 (ES35) jumped 1.44%, and the British FTSE 100 (UK100) closed positive 0.28%. European stocks closed with solid gains yesterday, ending five consecutive sessions of losses, as easing concerns that military action between Israel and Iran could disrupt the global economy lifted stocks around the world. Reports indicated that Tehran was ready to resume nuclear talks with the United States to demonstrate its willingness to de-escalate the exchange of blows with Israel, raising hopes that the conflict would not hamper global economic activity and energy prices. Markets also positioned themselves in anticipation of important monetary policy decisions this week, chief among them those of the Bank of England, the SNB, the Riksbank, Norges Bank, as well as the Fed and the Bank of Japan outside Europe.

On Monday, the Swiss government lowered its growth expectations for 2025 and 2026 as the export-oriented economy braces for the fallout from the global trade war. The Swiss economy, traditionally one of the most stable in Europe, is expected to grow by 1.3% in 2025, down from the government’s March expectations of 1.4%.

WTI oil prices fell by 1.7% to $71.80 per barrel on Monday, pausing a sharp 7% rise on Friday as reports emerged that Iran was seeking to ease tensions with Israel and resume nuclear talks. The decline followed an overnight surge to $77.49 after Israeli strikes on Iran’s South Pars gas field and an oil storage facility near Tehran. Despite the flare-up, market sentiment improved on hopes that the conflict would be contained and not cause significant damage to energy infrastructure or key shipping routes. Traffic through the Strait of Hormuz declined only slightly: 111 ships passed through on June 15, compared with 116 on June 12, indicating minimal disruption to oil supplies. Analysts expect the conflict to be short-lived and to help prevent further price spikes.

Asian markets mostly rose yesterday. Japan’s Nikkei 225 (JP225) rose by 1.26%, the Chinese FTSE China A50 (CHA50) gained 0.23%, the Hong Kong Hang Seng (HK50) added 0.70%, and the Australian ASX 200 (AU200) showed a positive result of 0.01%.

At its June meeting, the Bank of Japan left its key short-term interest rate unchanged at 0.5%, keeping it at its highest level since 2008, in line with market expectations. The unanimous decision underscored the Central Bank’s cautious stance amid escalating geopolitical risks and ongoing uncertainty over US tariff policy, which continues to pose a threat to global economic growth. Meanwhile, as part of its gradual policy normalization, the Bank of Japan confirmed its plan to reduce purchases of Japanese government bonds by 400 billion yen each quarter until March 2026.