Pausing While Watching Middle East and Awaiting Second Round of Powell Testimony – Currency Thoughts
Pausing While Watching Middle East and Awaiting Second Round of Powell Testimony
June 25, 2025
A fragile truce in the Iran-Israeli military conflict is mostly holding. Today is day two of a three-day NATO summit in The Hague. Agreement on a sharp increase in defense spending heads the agenda. In the wake of Middle Eastern developments over the past week, U.S. President Trump’s reception has been unexpectedly positive from what was imagined beforehand.
Fed Chairman Powell will reprise his congressional testmony before the Senate Banking Committee at 10:00 EDT. Day 1 elicited a good response from financial markets: stronger equities, softer long-term interest rates, a big drop in the price of oil and a weaker dollar.
The dollar on Wednesday prior to the start of America’s day rose 0.6% against the Japanese yen overnight, but other key dollar relationships barely moved. The per barrel cost of WTI oil, which had plunged from more than $76.0 at the start of this week to as low as $64.51, has bounced to show a net 0.9% overnight rise. Equities in Hong Kong (+1.2%) and China (+1.0%) got an extra lift today from financial measures to promote personal consumption unveiled at China’s Standing Congress session. Elsewhere in Asia, share prices rose 1.1% in Taiwan, 0.9% in India, 0.6% in Singapore and 0.4% in Japan. In Europe, however, key euro zone stock markets are trading in the red, and the British FTSE is only steady. U.S. stock futures are so far holding onto Tuesday’s big gains.
Ten-year sovereign debt yields rebounded overnight by three basis points in Italy, two bps in Germany and Spain, and one basis point in the United States and France, while the British 10-year gilt yield is flat. Their Japanese counterpart slipped two basis points further after a summary of last week’s Bank of Japan policy meeting left the future path of the bank’s short-term interest rate target dependent upon how well economic activity and inflation align with the central bank’s expectations.
So long as the tenuous ceasefire between Israel and Iran holds, it is being depicted as a foreign policy triumph for President Trump, and that has elicited a collateral strengthening of digital money. Bitcoin’s price went up 1.1% overnight, whereas gold is little changed.
Central bank authorities in Hungary, Morocco, Thailand and the Czech Republic left their respective policy interest rates unchanged after scheduled reviews at 6.5%, 2.25%, 1.75% and 3.5%. Each result was aligned with expectations.
- The last cut in Hungary’s rate, a cut of 25 basis points to 6.5%, left such at just half of the peak of 13.0% maintained from September 2022 until an initial cut in October 2023. Hungarian CPI inflation of 4.4% in May was marginally above market expectations and also greater than the 1-3% target range.
- Three reductions of 25 basis points each in the National Bank of Morocco‘s key interest rate were implemented at quarterly reviews in June 2024, December 2024 and March 2025. Moroccan CPI inflation of 0.4% in May was at a one-year low and below the central bank’s 2% medium-term target, but inflation expectations are anchored in line with the target, and non-agricultural growth has quickened markedly. Also, “significant uncertainties” surround the economic outlook.
- The decision to keep the Bank of Thailand’s key interest rate unchanged at 1.75% drew a dissenting vote that favored a 25-basis point reduction. 1.75% was attained after a 25-basis point cut in April and represents the lowest level since April 2023 versus a 3.0% peak maintained for a year until October 2024. CPI inflation in Thailand slipped under zero percent in April and was at a 15-month low of -0.6% last month versus a 1-3% target band. According to a released statement, the six-voter majority for not changing the interest rate gave “importance to the timing and effectiveness of monetary policy amid high uncertainties and limited policy space.”
- The Czech two-week repo rate had previously been cut by 25 basis points in February and May and before that by 275 basis points in the second half of 2024 after being maintained at a 7.0% in the first half of the year. Czech CPI inflation dived from 2.7% in March to 1.8% in April but then rebounded to 2.4% last month.
Wednesday has been a light day from a data release standpoint.
Icelandic producer price inflation of 0.3% in May was at a 14-month low and down sharply from 5.4% in April and a 29-month high of 9.5% in February.
Spanish producer price inflation was at a 7-month low last month of zero percent. Spanish officials also left the previously estimated GDP growth rate unchanged at +0.6% compared to the final quarter of 2024 and a four-quarter low of +2.8% on a year-on-year basis.
French consumer confidence in June matched May’s half-year low of 88. That stability masks a sluggishness. The pre-covid reading was 106 in November 2019 and 100 aligns with the data series’ long-term average.
Investor sentiment toward Switzerland rebounded to a a 4-month high of -2.1 in June from -22.0 in May and -51.6 in April. The growth and inflation output are evoking satisfaction. The central bank interest rate is now only zero percent, and geopolitical fears have lessened.
Japan’s April indices of leading and coincident economic indicators were each revised somewhat higher. The LEI was its lowest in 56 months, nevertheless, and the COI was just at a 2-month high.
U.S. mortgage applications last week, up 1.1%, recovered part of the previous week’s 2.6% slide. Building permits in May dropped to the lowest level since mid-2020.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Thailand, Czech National Bank, French consumer confidence, National Bank of Hungary, National Bank of Morocco
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