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What’s happening: The EUR/USD forex pair surged to around four-year highs on Monday amid weakness in the US dollar.
What happened: The greenback remained under pressure amid concerns over rising US government deficit and worries related to trade agreements with major economies.
Investors also assessed economic data released by the Eurozone during Monday’s session.
Why it matters: Global investors are monitoring trade developments between the US and some of its biggest partners ahead of the expiration of President Donald Trump’s 90-day respite on reciprocal tariffs. Canada recently scrapped its proposed digital services tax in a bid to ease trade tensions with the US.
The European Union indicated its willingness to accept a trade deal with the US, which would impose a 10% tariff on several of its exports.
Meanwhile, the US and China have reached a deal around shipments of rare earth minerals from China to the US.
Increased speculations of the Federal Reserve announcing interest rate cuts this exerted further pressure on the US dollar, lending support to the EUR/USD forex pair.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, declined more than 0.3% to 96.88 on Monday. The index recorded losses for the sixth straight month and logged its weakest half-year since the 1970s.
Economic data released on Monday showed bank lending to households in the Eurozone grew by 2.0% year-over-year to €7.002 trillion in May. This marked the fastest pace since May 2023 and came in-line with market estimates. Bank lending to non-financial corporations rose by 2.5% year-over-year to €5.23 trillion in May, versus 2.6% in the previous month.
The EUR/USD pair gained more than 0.5% to 1.1790 on Monday, with the forex pair surging to its highest level since September 2021. The single currency rose around 3.8% last month versus the greenback, while surging around 14% year-to-date.
What to watch: Investors will continue monitoring trade negotiations between the US and EU which could significantly impact the euro ahead.
Data on HCOB manufacturing PMI (1200 UAE Time), ECB Consumer Inflation Expectations (1200 UAE Time) and inflation rate (1300 UAE Time) from the Eurozone will be released today. The HCOB Flash Eurozone manufacturing PMI is expected to remain unchanged from the previous month at 49.4 in June, while median inflation expectations in the Eurozone are expected to rise to 3.2% in May from 3.1% in April.
Analysts expect Eurozone’s consumer price inflation to accelerate to 2% year-over-year in June, from 1.9% in May.
Context: Equity markets in Asia traded mixed this morning as investors digested the latest economic reports.
Details: Data released this morning showed the Caixin China general manufacturing PMI surprisingly rose to 50.4 in June, from 48.3 in the previous month. The figure also topped market estimates of 49.
The au Jibun Bank Japan manufacturing PMI came in at 50.1 in June, below the preliminary reading of 50.4, but higher than May’s 49.4. This marked the first expansion in Japan’s manufacturing activity since May 2024. The Bank of Japan’s index for large manufacturers rose to 13 in the second quarter, compared to a one-year low of 12 in the previous quarter, also surpassing market expectations of 10.
Japan’s stock market ended a five-day winning streak due to renewed trade concerns after the US President Donald Trump warned to impose fresh tariffs due to the Asian nation’s refusal to import American rice. Trump also confirmed that the 25% tariff on auto imports from Japan would remain in place.
Japan’s Nikkei 225 fell around 1.15% to 40,020.15 this morning, while China’s Shanghai Composite index gained 0.27% to 3,453.60.
What to watch: Investors await the release of au Jibun Bank’s services and composite PMI from Japan and the Caixin services and composite PMI from China on Thursday. The au Jibun Bank’s services PMI is expected to rise to 51.5 in June from 51.0 in May, while Caixin China general services PMI is projected to decline slightly to 51 in June from 51.1 in May.
Other Markets: European indices closed lower on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.43%, 0.51%, 0.33% and 0.42%, respectively.
Russia’s military forces claimed to have occupied the complete Luhansk region in Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.
Thailand’s S&P Global manufacturing PMI rose to 51.7 in June, from 51.2 in the previous month. The region’s manufacturing activity recording the strongest growth since August 2024 lent support to the THB/USD forex pair.
Taiwan’s S&P Global manufacturing PMI declined to 47.2 in June, from 48.6 in May. This being the steepest contraction in the country’s manufacturing activity since December 2023 sent the TWD/USD pair lower in forex trading this morning.
Philippines’ S&P Global manufacturing PMI climbed to 50.7 in June, from 50.1 in the previous month, which lent support to the PHP/USD forex pair.
Singapore’s private home prices rose by 0.5% in the second quarter, easing from a 0.8% gain in the previous quarter, which sent the SGD/USD pair lower this morning.
UK’s S&P Global manufacturing PMI (1230 UAE Time) and Green Gilt 2053 auction (1300 UAE Time), Spain’s 12-month Letras auction (1240 UAE Time) and 6-month Letras auction (1240 UAE Time), South Africa’s ABSA manufacturing PMI (1300 UAE Time), Mexico’s foreign exchange reserves (1500 UAE Time), business confidence (1600 UAE Time) and S&P Global manufacturing PMI (1900 UAE Time), US Redbook index (1655 UAE Time), Fed Chair Powell speech (1730 UAE Time), S&P Global manufacturing PMI (1745 UAE Time), ISM manufacturing PMI (1800 UAE Time), JOLTs job openings (1800 UAE Time), ISM manufacturing employment (1800 UAE Time), construction spending (1800 UAE Time), ISM manufacturing new orders (1800 UAE Time), ISM manufacturing prices (1800 UAE Time), JOLTs job quits (1800 UAE Time), RCM/TIPP economic optimism index (1810 UAE Time), Dallas Fed services index (1830 UAE Time) and Dallas Fed services revenues index (1830 UAE Time), as well as Brazil’s S&P Global manufacturing PMI (1700 UAE Time).
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