Here, There and Everywhere – Currency Thoughts
Here, There and Everywhere
June 26, 2025
President Trump is back in Washington from the NATO summit in The Hague after receiving wide praise there from other attendees for achieving a cease fire between Israel and Iran, getting European nations to ante up more spending for the common defense, and setting the stage for renewed talks with Iran as soon as next week. He recalibrated the accepted facts regarding presumed damage to Iran’s nuclear energy program and also found time to make market-moving news about the Federal Reserve chairmanship. Although Jerome Powell’s second four-year term as Chairman doesn’t end until mid-May, Trump informed reporters that he already has several potential replacements in mind, and the Wall Street Journal delivered the additional clarifying scoop that the final choice will likely be revealed by October, if not a bit sooner. All this has undercut the “patient wait-and-see” message of Powell’s Humphrey-Hawkins testimony, prompting financial markets to price in a somewhat lower end-2025 projected federal funds rate level than before.
The image of a less independent central bank has also fostered a lower dollar, which weakened on a weighted basis to its lowest level since Russia invaded Ukraine in February 2022. Against specific other currencies, the greenback overnight fell by 0.5% against the Swiss franc, euro and sterling, by 0.4% relative to Mexican peso, Australian dollar and kiwi, and 0.3% vis-a-vis the Canadian dollar.
Ten-year sovereign debt yields are down from Wednesday levels by four basis points in Italy, three bps in Spain, two bps in the United States, Germany, and France, and a single basis point in Great Britain. The Japanese JGB yield firmed two bps, in contrast.
U.S. equity futures were slightly higher with two hours to go before today’s opening bell. Asian stock markets closed mixed, with a gains of 1.7% in Japan, 1.2% in India, 1.0% in Indonesia, and 0.3% in Taiwan and Singapore but drops of 0.9% in South Korea, 0.6% in Hong Kong and 0.2% in China. European share prices are somewhat higher, led by a 0.7% rise in the German DAX.
Prices for WTI oil (0.6%), gold (0.3%) and Bitcoin (0.1%) are each up, too.
Japanese corporate service price inflation decelerated 0.1 percentage point in May to a 3-month low of 3.3% but remained above last year’s average pace of 2.9%.
South African producer price inflation slowed to a half-year low of just +0.1% in May. Forecasters had anticipated a slight acceleration instead.
Malaysian PPI inflation became more negative in May, printing at a 23-month low of -3.6% after readings of -3.4% in April and -1.9% in May. The oil component tumbled over 15.0% on year.
Tariphobia and geopolitical uncertainty continue to suppress consumer and business sentiment around the world. German consumer confidence at the end of June proved weaker than assumed, edging down 0.3 index points below May’s half-year high. Swedish consumer sentiment rose a point to a 3-month high but, at 84.6, was well below last November’s 35-month high of 101.4. Second-quarter consumer confidence in South Africa recovered 10 index points from the first-quarter’s 7-quarter trough of -20 but merely matched the year-earlier quote of -10. Irish consumer sentiment improved to a 3-month high in June but, at 62.6, was well below a reading of 87.2 four years earlier.
The British distributive trades survey index far underperformed expectations in June, diving 19 index points to a 17-month low of -46. South Korean business sentiment eased back to 70 this month from 73 in May and an average reading of 66 during the first four months of 2025. Austria’s manufacturing purchasing managers survey fell 1.4 points in June to a 2-month of 47.0 and has been below the 50 threshold that delineates positive growth from a contracting trend ever since August 2022. Swedish business confidence fell 3.6 index points to an 8-month low in June.
The HKD 124.7 billion trade deficit of Hong Kong in the first five months of 2025 was 18.5% wider than a year earlier. Sweden’s trade surplus of SEK 48.1 billion in January-May was almost identical to its year-earlier total.
Several U.S. economic indicators crowd today’s data release menu, led by quarterly GDP and accompanying PCE deflator and also including the preliminary goods trade deficit, durable goods orders, pending home sales, the Kansas City Fed manufacturing survey and weekly jobless insurance claims. The Bank of Mexico will be announcing decisions made at today’s scheduled policy review.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Trump returns to Washington
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