AUD and NZD hit new 2025 highs against the US dollar. European indices continue to grow

The US indices did not trade yesterday due to the bank holiday. The US stock futures jumped on Tuesday after President Donald Trump announced over the holiday weekend that he would delay the imposition of 50% tariffs on European Union goods, extending the deadline to July 9. The decision followed a volatile week for financial markets, driven by growing concerns over the US fiscal outlook and lingering trade uncertainty.

Equity markets in Europe were mostly rising on Monday. Germany’s DAX (DE40) rose by 1.69%, France’s CAC 40 (FR40) closed 1.21% higher, Spain’s IBEX35 (ES35) Index gained 0.83%, and the UK’s FTSE 100 (UK100) was not trading on Monday. Frankfurt’s DAX Index added 1.7% to 23,997 points on Monday, outperforming its regional peers, helped by US President Donald Trump’s decision to delay the imposition of 50% tariffs on EU goods until July 9, up from last Friday’s June 1 deadline. Germany, Europe’s largest economy and a major exporter, increasingly relies on the US as a key market for pharmaceuticals, machinery, cars, and automotive components such as engines and machine parts.

WTI crude prices fell to around $61.3 a barrel on Tuesday on fears of further OPEC+ supply increases. The group will meet later this week and is likely to finalize production targets for July, with reports suggesting a possible increase of 411,000 bpd. Earlier this month, OPEC+ agreed to accelerate oil production increases in June for the second consecutive month. Meanwhile, Iran on Monday refused to suspend uranium enrichment as part of a nuclear deal with the US, just days after Trump hinted that an agreement may be imminent. Iran’s president has said Iran will be fine even if the sides fail to reach an agreement. A failure of nuclear talks would mean continued sanctions against Iran, which would limit Iranian oil supplies and support oil prices.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) rose by 1.00%, China’s FTSE China A50 (CHA50) lost 1.91%, Hong Kong’s Hang Seng (HK50) decreased by 1.35%, and Australia’s ASX 200 (AU200) was positive 0.01%.

The Bank of Japan (BoJ) should carefully assess the impact of rising food prices on core inflation, which is currently nearing the 2% target, Bank of Japan Governor Kazuo Ueda said. Ueda reiterated the Central Bank’s willingness to raise interest rates if data bolsters confidence in the economic recovery. Despite recent rate hikes and the end of a decade-long economic stimulus program, global uncertainties such as tariff hikes in the US have forced the BOJ to revise its growth expectations downward. Ueda warned that both upside and downside risks remain, especially in fiscal years 2025 and 2026.

In Australia, traders await key Australian inflation data this week, which could play a crucial role in determining the Reserve Bank of Australia’s (RBA) policy trajectory. Last week, the RBA cut the rate to 3.85% as expected and signaled the possibility of further easing in response to increasing economic headwinds and slowing inflation. Markets currently estimate a 65% probability of another rate cut in July, with expectations pointing to a total of 75 basis points of easing by the first quarter of 2026.

There is a high probability that the Reserve Bank of New Zealand (RBNZ) will continue to cut interest rates as early as tomorrow. A 0.25% cut from 3.5% to 3.25% is expected. In the absence of shock results, the New Zealand Dollar is likely to be driven by the bank’s updated expectations. With market pricing in the possibility of a move to below 3% later this year below the 3.1% level that the RBNZ expected three months ago, risks to the New Zealand dollar could be shifted to the upside if the bank fails to meet dovish expectations. The NZD/USD pair briefly touched highs for the year on Monday, rising to levels last seen just after the US presidential election.