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What’s happening: The Japanese yen rose sharply on Tuesday amid weakness in the US dollar.
What happened: US President Donald Trump announcing a ceasefire agreement between Israel and Iran exerted pressure on the greenback.
The yen recovered from multi-week lows, responding to the sharp decline in oil prices on Monday.
Why it matters: The yen had been weakening with crude prices surging due to the Israel-Iran conflict, as Japan imports almost all the oil it consumes. The sharp decline in oil prices on Monday eased concerns about Japan’s trade balance and supported the yen.
The ceasefire agreement between Israel and Iran raised hopes of an end to the biggest military conflict in the Middle East.
The Bank of Japan kept its benchmark rate unchanged at 0.5% at its June meeting, with the central bank maintaining a cautious stance citing inflation and market-related risks.
Although the latest inflation rate had slightly topped estimates, BoJ policymakers warned that and improvement in the CPI is likely to be sluggish and economic growth could ease.
The US dollar declined on Tuesday despite Federal Reserve Chairman Jerome Powell saying, in testimony before US Congress, that he expects inflation to begin rising soon and that the Fed was also in no hurry to cut interest rates in the meantime.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, dipped to 97.86 on Tuesday. The index fell around 0.1% this morning.
The JPY/USD forex pair rose sharply to 144.93 on Tuesday. The pair extending gains this morning, adding around 0.2%. Meanwhile, Japan’s Nikkei 225 rose around 0.24% to 38,884.76 this morning.
What to watch: Investors await the release of economic data on unemployment rate, retail sales and Tokyo core CPI on Friday. Analysts expect Japan’s unemployment rate to remain unchanged from the previous month at 2.5% in May.
Retail sales in Japan, which grew by 3.3% year-over-year in April following a 3.1% rise in the previous month, are expected to grow 2.7% year-over-year in May. Analysts expect the core consumer price index for the Ku-area of Tokyo in Japan to rise 3.3% year-over-year in June, decelerating from 3.6% in the previous month.
Context: Equity markets in Europe closed higher on Tuesday following the announcement of a ceasefire between Israel and Iran.
Details: US President Trump announced a ceasefire agreement between Israel and Iran, although the accord remains fragile. While Israel accused Iran of violating the agreement, leaders said Tehran would honour the deal unless provoked by Israel.
Market sentiment for European stocks was also supported by the news of Germany’s lawmakers approving fresh economic stimulus for 2025 and 2026 to kickstart growth in the region’s largest economy.
The STOXX Europe 600 Index gained 1.11% to close at 540.98 on Tuesday. London’s FTSE 100 index rose 0.01% to 8,758.99, while Germany’s DAX 40 and France’s CAC 40 added 1.60% and 1.04%, respectively.
Most sectors closed on a positive note on Tuesday, with shares of SAP, ASML, LVMH and Hermes recording sharp gains during the session. With a sharp decline in crude oil prices, energy shares underperformed, with Shell, BP, and Repsol closing lower on Tuesday.
What to watch: Investors await the release of economic data on economic sentiment, consumer confidence and industrial sentiment from the Eurozone on Friday. Eurozone’s economic sentiment indicator, which rose for the first time in three months to 94.8 in May, is expected to increase further to 95.1 in June.
Analysts expect the Eurozone consumer confidence indicator to decline to -15.3 in June, from -15.1 in the previous month, while the industry confidence indicator is projected to improve to -9.9 in June, from -10.3 in May.
Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.19%, 1.11% and 1.53%, respectively.
At the NATO summit, Ukraine’s President Volodymyr Zelenskyy urged leaders to increase their investments in the country. The news sent the RUB/USD slightly lower in forex trading this morning.
Australia’s monthly Consumer Price Index rose by 2.1% in May, compared to 2.4% in the previous three months. The recent reading being the lowest since October 2024 lent support to the AUD/USD forex pair.
New Zealand’s trade surplus widened to NZ$1.235 billion in May, from NZ$54 million in the year-ago month, which sent the NZD/USD pair higher in forex trading this morning.
Canada’s manufacturing sales contracted by 1.3% in May, versus a 2.8% decline in April, exerting pressure on the CAD/USD forex pair.
US crude oil inventories declined by 4.28 million barrels in the week ending June 20, compared to a contraction of 10.13 million barrels in the previous week, according to the American Petroleum Institute. US crude oil stockpiles declining for the fourth straight week sent the WTI crude oil prices higher this morning.
UK’s 15-year Treasury Gilt auction, Italy’s 2-year BTP Short Term auction (1310 UAE Time) and 5-year BTP€i auction (1310 UAE Time), France’s unemployment benefit claims (1400 UAE Time) and jobseekers total (1400 UAE Time), US MBA mortgage applications (1500 UAE Time), Fed Chair Powell testimony (1800 UAE Time), new home sales (1800 UAE Time), EIA crude oil stocks change (1830 UAE Time), EIA gasoline stocks change (1830 UAE Time), EIA distillate stocks change (1830 UAE Time), EIA heating oil stocks change (1830 UAE Time), 17-week Bill auction (1930 UAE Time), 2-year FRN auction (1930 UAE Time) and 5-year Note auction (2100 UAE Time), Brazil’s current account (1530 UAE Time) and foreign direct investment (1530 UAE Time), India’s M3 money supply (1530 UAE Time), Canada’s 10-year Bond auction (2000 UAE Time), Russia’s industrial production (2000 UAE Time) and PPI (2000 UAE Time), as well as Argentina’s current account (2300 UAE Time).
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