30th June 2025

Snapshot

• DXY: Market looking towards this week's US labour data for timing of potential rate cuts
• EUR/USD: Market await soundbites from ECB Sintra forum and Germany's retail sales and inflation data
• USD/JPY : Market looks ahead to the Tankan survey to be released on Tuesday
• AUD/USD & NZD/USD: May Private sector credit data reveals a gradual cooling in lending activity / NZ ANZ June Business Confidence and ANZ June Activity Outlook showed notable improvements
• Oil: OPEC+ set to consider another 411,000 barrel-a-day increase for August when they meet on Sunday
• Gold: Attempting to stabilize recent corrective dips above 29 May 3245.50 reaction low

US Dollar

Dxy recovery rejected just under the 50 DMA. Recent breach below 97.602 (12 Jun low) to post fresh YTD lows suggest the broader bearish trend is now resuming. Sights on 95.677 (16 Feb 22' low) next. Recovery attempts, if any, should fade well below the 50 DMA

The dollar paused its decline last Friday as Treasuries stalled and the SPX index pushed to fresh YTD highs. Markets appear to be looking past fears of reciprocal tariffs reasserting after the July 9 deadline after Trump’s administration touted progress on trade deals, with trade frameworks already signed with UK and China and a potential deal with India amid other countries coming up. Markets also took solace in the fact that Treasury Secretary Bessent has indicated there may be some extensions to the July deadline to wrap up major pacts by Labour Day, taking this as a sign that we have seen peak tariffs. However, Trump abruptly announcing on social media that he was terminating trade talks with Canada over its digital services tax may be sending a warning shot to other leaders to not step out of line and for them to hasten their progression on trade deals. It is also a stark reminder of the sudden policy swings that could come from this administration

On the economic front, last Friday’s May Core PCE price index picked up slightly to 2.7% YoY, just above forecast of 2.6% but still consistent with limited price pressures, nothing to derail market’s bets for two full cuts for the year yet. Meantime the other closely watched data point, Real Personal Spending for May declined -0.3%, the most since the start of the year. The fall in May’s data came after the revision lower to Q1 GDP, which also showed weaker consumption than originally reported. This paints a less resilient economy. Personal Income also came in below consensus at -0.4% vs consensus of 0.3% and prior 0.7%. The University of Michigan Sentiment Index finalized reading for June was however revised upwards to 60.7 as consumers grew more confident that we may have reach “peak tariffs” and that the potential inflationary impact of tariffs may not come to pass. All in all, last Friday's data docket was a mixed results which tilts slightly more to the dovish side

Most Fed officials still see a July cut as premature though, with the Fed likely opting to await more June-July data. September is eyed as the most likely month for the Fed to resume their rate cuts

Meantime, the Trump administration, from Trump to Lutnick to Vance have all been clamouring for lower rates. We continue to reiterate the risk of Trump pulling forward a decision to name the next Fed Chair who will likely be an uber dove to pander to Trump’s and Bessent’s desire to grow nominal GDP to stabilize the debt-to-GDP ratio.

Despite US rates notably above most of its G10 peers and traders talking about how “oversold” the dollar is, the dollar is unable to garner bids, repeatedly fading every time it heads towards the 50 DMA. Powell refusing to cut rates may well be what is stopping the dollar from heading on its next sharp downleg, but even Powell’s resolve have appeared to waver recently as he indicated that “if the Fed don’t see the tariff impact on inflation in the June-July data they remain open to the idea that pass through to consumer prices from higher import duties may be less than they think and it will matter for their policy decisions". He stated that "if it turns out that inflation pressures do remain contained, then the Fed will cut rates, sooner rather than later”

The pending reduction in the Supplementary Ratio (SLR) to build resilience in the UST markets is also suggesting to some that maybe the UST market is not as deep and liquid as advertised. Meanwhile, the advancing OBBA continues to promise even more stimulus. According to a new estimate from the nonpartisan Congressional Budget Office, the Senate version would add nearly $3.3 trillion to US deficits over a decade. This likely leads to heightened Treasury supply, eroded market confidence in US fiscal discipline with the release valve likely to be a weakening dollar

While we continue to see the dollar being pressured downwards, this dollar weakness could also continue to benefit the large cap US equities with significant international revenue streams. In the meantime, view any interim bounces in the dollar for what it is, nothing more than a tactical buy or an opportunity to add to shorts with the long-term downtrend still very much intact. Bear in mind the last two structural dollar bear markets from 1985-1992 and 2001-2008 saw the dollar decline by 52% and 41% respectively over an average period of seven years. We likely remain way too early for talks of a reversal in the dollar trend

Upcoming US data layer today :

Thin US docket with Jun Dallas Fed Manufacturing Activity in focus. Analysts are expecting continued contraction but with further improvement from May's reading of -15.3. This would represent the fifth consecutive month of contraction, though with a steadily moderating pace of decline

The slate of labour data out throughout the week - May JOLTS Job Openings, June Challenger Job Cuts, Jun ADP Employment Change, Initial Jobless Claims for week up to Jun 28, June Nonfarm Payrolls and June Unemployment rate will be keenly observed for signs of labour markets softening, which could affect the timeline for the next Fed rate cut. Other data of note for the week, includes June ISM Manufacturing, June ISM Services Index, May Factory Orders and the May Trade Balance

Euro

EurUsd hit fresh YTD highs, testing 1.1753 (27 Jun high) thus far. Bears need to track back below 1.1446 (19 Jun higher low) to dampen upside momentum. Otherwise scope is seen for further upside to 1.1909 – 1.1975 (30 Jul 21’ – 25 Jun 21’ highs). We continue to favour a buy on dips strategy for this pair

The structural bear market in the dollar remains intact and this should continue to fuel further euro upside. A number of bank strategists are eyeing gains towards 1.20 by year end, a level last seen four years ago. UBS analysts said that interest rates in the US can “decline more quickly in coming months than in the rest of the group of G10 nations” and this could be a catalyst to usher the euro towards 1.20. UBS Investment Bank see the euro at 1.23 by year end

Markets will be looking out for any soundbites from the world’s leading Central Bankers as they discuss monetary policy at the ECB’s June 30-July 2 Sintra forum titled "Adapting to Change: Macroeconomic Shifts and Policy Response". The panel discussion will be keenly observed for signs of where key Central Banks are headed in their monetary policy in response to the uncertainty in Trump’s policies

French finance minister Eric Lombard said the European Union can clinch some form of trade agreement with the US before the July 9 deadline. He said in an interview on Sunday that “From the experience of the last few months, we can clearly see that the US is in on the deal”. The negotiations possibly involve having Europe buy more American liquefied natural gas

Meantime one geopolitical crisis de-escalates and another seem to worsen. Ukraine reported record number of Russian missiles and drones attack since the start of the war. Russia continues to press hardline demands for Ukraine to surrender territory and said they were willing to hold a third round of talks in Istanbul

Upcoming Eurozone Data to be published later today :

Eurozone publishes its M3 Money Supply YoY for May fc 4.00% vs 3.90%

Germany will publish its Import Price Index data and Retail Sales data for May

The strong April Retail Sales data 4.40% YoY (Revised) suggests that the German consumer sector is outperforming expectations, possibly due to base effects from last year’s weaker numbers, improved real incomes or a shift in spending patterns. If May’s figures remain elevated, it could reinforce the view that the German retail sector is recovering robustly, possibly providing a tailwind for overall GDP growth

Germany will publish their CPI data for June

If Germany’s June CPI YoY stabilizes around 2.1%, it could indicate that inflation is now well-anchored near the ECB’s target, following a period of higher volatility in 2022–2023. The main drivers are still food and services, while energy prices remain a source of volatility. With inflation no longer accelerating, the environment is supportive for both consumers and monetary policymakers, potentially paving the way for more accommodative policy if growth falters

Japanese Yen

UsdJpy unable to sustain gains after breaching the ceiling of a wide 3 weeks 142.12-146.28 sideways range, reversing sharply from 148.03 (23 Jun high). The 148.65-149.65 (200 DMA) zone should remain a hard barrier to crack. Recent breach back below the 50 DMA have yet to see market post a daily close below there but bears appear to have the upper hand now. A daily close below the 50 DMA maintains downside pressure for a re-visit of the 142.12-38 lows (27 May – 3 Jun lows)

Nothing much came out from Japan’s Chief Trade negotiator Akazawa’s meeting with US Commerce secretary Howard Lutnick last Friday, with both parties reconfirming their stance on US tariffs and pledging to continue to work towards an agreement. Akazawa has reportedly extended his US visit for further talks. Trump’s recent social media post suggests both sides may still be far from reaching a common ground. Trump stated that it is unfair that US takes millions of Japanese cars while Japan won’t take American cars, suggesting Japan could take more oil and other things to reduce the trade deficit.

A favourable trade deal may be needed to give the BOJ more room to manoeuvre the next rate hike, data permitting but for now it seems difficult for Akazawa to let Trump know maybe nobody in Japan wants American cars. The yen though is currently trading firm against the dollar alongside the recent pivot to Asian currencies amid rising expectations for Fed rate cuts

This week markets will be also be eyeing BOJ’s Tankan Survey released on Tuesday. It will be the first survey in which BOJ will get to hear companies views on the impacts of US reciprocal tariffs

Analysts are expecting the BOJ’s 2Q Tankan Survey to show that business sentiment softened, weigh down by US 25% levies on autos and steel. High food prices may also dampened sentiment in services. Consensus estimates are for the Tankan Large Manufacturing Index to ease to 10 from prior reading of 12 and for the Tankan Large Non-Manufacturing Index to slip to 34 from prior 35. Capital expenditure plans for large firms are anticipated to show modest growth, while small firms may signal a decline in investments. Price related gauges are likely to point to long term inflation expectations above 2%. Any upside surprises in the large manufacturers index and capex outlook could see the Yen and Nikkei react positively

Recently Released Japan Data :

• May Preliminary Industrial Production MoM 0.5% vs fc 3.5% vs prior -1.1%
• May Preliminary Industrial Production YoY -1.8% vs fc 1.6% vs prior 0.5%

Both the month-on-month and year-on-year figures fell well short of market forecasts. The MoM rebound to +0.5% is notably weaker than the expected 3.5%, and the YoY contraction of -1.8% is a sharp reversal from last month’s modest growth and well below the anticipated +1.6%

The data suggests that the industrial sector is struggling to regain momentum after previous declines. The YoY contraction, in particular, points to a broader and more persistent softness, likely reflecting weak external demand, ongoing trade tensions, and subdued domestic consumption

This underperformance in industrial production, combined with cautious consumer behavior and lackluster investment, suggests that Japan’s economic recovery remains fragile. If this weakness continues in June and July, it could signal a more persistent slowdown that may limit upside risks to inflation and keep the Bank of Japan cautious about further tightening

Upcoming Japan Data Later Today:

• May Housing Starts fc -14.6% vs -26.6%
• May Annualized Housing Starts fc 0.723m vs prior 0.626m

Australian and New Zealand Dollar

AudUsd punched out a “hammer” candle low at .6373 on 23 June to underpin renewed gains to breach .6552 (16 Jun high) to post fresh YTD highs at .6564 (26 Jun high) thus far. Scope seen for advance towards 7 November 24’ .6688 lower high next. Under the .6373 - .6357 (12 May low) higher floor needed to derail bulls

In a quarterly report from the Department of Industry, Science and Resources, Australia cut its forecast earnings from commodity exports. This year’s meteoric rise in gold prices failed to offset weakness in iron ore and natural gas and total resource and energy export earnings fell about 7% to an estimated A$385 billion in the 12 months through June. The report forecast that income is set to fall further in the next two years due to rising trade barriers, weaker global economic growth and declining prices

Last week’s May inflation numbers released, came in at 2.1% below consensus of 2.3% and close to the bottom of RBA’s 2-3% target band. A substantial slowdown in the trimmed mean CPI to 2.4% from prior 2.8% points towards a potential downwards revision to RBA’s inflation outlook. Several economists have since brought forward calls for RBA’s next easing to their July meeting

Australia’s retail sales and household spending data will due early July, weak numbers in those data should cement a rate cut at the RBA July 8 meeting. OIS markets are pricing in 3 more cuts for the year to a terminal rate of 3.10%. Some economists are now seeing the terminal rate at 2.85%

Despite this, Aud continues to firm against the dollar’s decline as markets anticipate the Fed will soon resume their own easing cycle. The overall risk on mood since the easing of geopolitical tensions in the middle east also continues to buoy antipodean bulls. Add to this, the recent US trade deal with Australia’s largest trade partner, China and the risk currencies continue to get a bid

Recently Released Australia Data :

• June Melbourne Institute Inflation MoM 0.1% vs prior -0.4%
• June Melbourne Institute Inflation YoY 2.4% vs prior 2.6%
• May Private Sector Credit MoM 0.5% vs fc 0.6% vs prior 0.7%
• May Private Sector Credit YoY 6.9% vs prior 6.7%

Melbourne Institute inflation readings suggest price pressures remain subdued with MoM rising a modest 0.1% after a negative print in May. The YoY reading eased to 2.4% from prior 2.6% and reinforce that underlying inflation is cooling

Private sector credit data reveals a gradual cooling in lending activity. The monthly growth rate of 0.5% marks a continued deceleration (0.7% in April). However, the annual growth rate has accelerated to 6.9%, indicating that while the pace of new lending is slowing, overall credit expansion remains robust

This set of data represents another tilt towards the view that RBA’s next move is likely to be an easing as inflation risks recede and growth concerns come to the fore

NzdUsd punched out a “hammer” candle low at .5883 on 23 June, well above the 200 DMA~.5854. Price action has since broken back above the rising 50 DMA~.5977 and is pushing towards .6088 (16 Jun YTD high). Above there paves the way for .6168 (76.4% retrace of Sep 2024-April 2025 .6379-.5486 fall) next. Lapse back under .5847 (12 May higher low) hints topping instead

Recently Released NZ data :

• May Filled Jobs SA MoM 0.1% vs prior -0.3% (Revised)
• June ANZ Activity Outlook 40.9 vs 34.8
• ANZ Business Confidence 46.3 vs 36.6

The positive filled jobs data, though modest, suggests the labor market may be responding to the RBNZ's monetary stimulus

June ANZ Activity and ANZ business confidence data both showed a notable improvement. The rebound in business confidence was anticipated due to more positive responses in late May due to the US-China trade truce and as global tariff uncertainties eased. The improvement was strongest in agriculture while retail remained the worst sector

Several forward-looking indicators showed notable improvement (eg; Export intentions 13.9 vs 11.8 prior, Investment intentions 19.9 vs prior 11.6, profit expectations 16.7 vs 11.1 prior)

Oil and Other Commodities

Brent Crude Oil reverses sharply from recent 78.40 high (23 Jun high) to dip back below the 200 DMA. Market attempting to stabilize above the 50 DMA~66.66. Back above the 200 DMA~71.98 needed to firm upside moves. A breakdown below the 50 DMA risks a full retrace of the June 63.00-81.40 rally

With the ceasefire and de-escalation in the Middle East reducing immediate threats to energy infrastructure, the focus returns to demand concerns, inventories and OPEC+ supply hikes. OPEC+ is set to consider another 411,000 barrel-a-day increase for August when they meet on Sunday

Markets will also be looking towards if the Trump administration resumes its reciprocal tariffs after the July 9 deadline which could threaten to lower consumption

Bloomberg economics is now calculating Brent’s fair value at just below $70 a barrel after the easing of geopolitical tensions compared to $80 previously

Gold breach below the 50 DMA support to suggest the consolidative/corrective pause under 3500.10 (22 Apr peak) remains in play. While the key 3120.98 swing low (15 May low) remains intact we still favour current wide consolidation as an unfolding bull continuation pattern. Eventual renewed attempt on 22 Apr 2025 all-time high at 3500.10 remains our favoured scenario. Above which triggers an equality projection at 3664.37 (1 x 2956.71-3500.10 off 3120.98)

The recent de-escalation of the middle east geopolitical crisis and the accompanying downwards drift in gold masks the true economic drivers behind Gold’s ascent. We continue to believe the longer term structural bullish themes for Gold remains very much intact

Mainly the rising global debt levels with both public and private debt reaching unprecedented heights. This will continue to raise concerns about currency debasement which will put a floor under Gold. Going by the dollar’s last two bear market cycles we are not even halfway there. A new Fed Chair who will pander more to Trump’s requests could initiate the next major down leg for the dollar and upleg for Gold

The sovereign reserves diversification also continues to be in play as Central Banks continue to diversify away from the dollar. Bullion accounted for about 20% of global official reserves last year ahead of euro at 16%