The US dollar index rebounded above 98.2 on Friday but remains down for the week. Gains followed Israel’s strike on Iran, increasing safe-haven demand. Earlier weakness came from soft US inflation and trade tensions, raising Fed rate cut expectations. The euro fell to $1.15 after hitting a 3.5-year high, as ECB signaled a pause and the Fed eyed cuts. The yen rose to 143 per dollar on safe-haven flows, with BOJ signaling possible hikes. The pound dipped to $1.35 after weak UK GDP and jobs data, though supported by a softer dollar.
Gold surged over 1% to above $3,420, nearing record highs on geopolitical risks and Fed cut hopes. Silver eased to $36 after a 13-year high, supported by strong demand and supply deficits. Brent crude hit $78 before settling near $74, boosted by Middle East tensions, stock drawdowns, and easing fears. Oil is set for its best week since Feb 2022.
The US 10-year yield bounced to 4.4% from a one-month low after Israel’s Iran strike. Trump urged diplomacy, and the US denied involvement. A $22B 30-year bond sale saw strong demand despite trade risks and debt concerns. Fed is expected to hold rates next week, with 2025 cuts likely. Japan’s 10-year yield fell to 1.4%, and Germany’s to 2.53%.
Japan’s GDP was flat in Q1 2025, better than the expected 0.2% contraction, but slower than the 0.6% growth in Q4. Private consumption, over half the economy, was revised up to a 0.1% gain, reflecting efforts to offset rising food and energy costs. Business investment grew 1.1%, the fastest since Q2 2024, though below the 1.4% initial estimate and up from 0.6% in Q4. Government spending dropped 0.5%, its first decline in five quarters. Net trade weighed on GDP by 0.8 percentage points, as exports fell for the first time in a year (-0.5% vs 1.7%) and imports jumped 3.0% (vs -1.4%), the largest increase in five quarters.
Annual inflation in the US rose to 2.4% in May 2025 from 2.3%, below the 2.5% forecast. Food prices increased 2.9% (vs 2.8%), transportation services 2.8% (vs 2.5%), used cars 1.8% (vs 1.5%), and new vehicles 0.4% (vs 0.3%). Shelter inflation eased to 3.9% (from 4%). Energy costs declined 3.5%, with gasoline down 12%, fuel oil 8.6%, and natural gas up 15.3%. Monthly CPI rose 0.1% (vs 0.2%). Core inflation stayed at 2.8% annually, missing the expected 2.9%. Monthly core CPI rose 0.1% (vs 0.2% prior and 0.3% expected).
The UK economy grew 0.7% in Q1 2025, the strongest in three quarters, exceeding Q4’s 0.1% and the 0.6% forecast. Services led with 0.7% growth, driven by admin services (3.3%) and retail trade (1.5%). Production rose 1.1%, with transport equipment (2.7%) and machinery (3.8%) leading. Construction was flat. On the expenditure side, fixed capital formation rose 2.9%, fueled by aircraft imports and investments in ICT and buildings. Net trade supported growth, with exports up 3.5% and imports 2.1%. Household consumption rose 0.2%. Yearly GDP rose 1.3%.
US initial jobless claims remained at 248,000 in early June, matching the prior week and defying forecasts of 240,000. This is the highest since October 2024, suggesting labor market softening. The four-week average rose to 240,250, the highest since August 2023. Continuing claims jumped by 54,000 to 1,956,000, the highest since November 2021 and above the 1,910,000 forecast. Federal employee claims rose by 23 to 561 amid recent Department of Government Efficiency dismissals.
Germany’s inflation held at 2.1% in May 2025, its lowest since October 2024. Goods inflation rose to 0.9% (from 0.5%), with food prices high at 2.8%, led by fruit (7.4%), sweets (6.6%), fats/oils (4.7%), and dairy (4.6%). Energy prices fell 4.6% (vs -5.4%), including fuel (-6.8%), electricity (-2.4%), and heating oil (-9.5%). Services inflation dropped to 3.4% (from 3.9%), with flight and telecom prices down. Core inflation eased to 2.8% (from 2.9%). Monthly CPI rose 0.1% (vs 0.4%), and the EU-harmonised rate came in at 2.1% y/y and 0.1% m/m.
The US dollar index rose above 98.2 after Israel’s strike on Iran spurred safe-haven buying. Earlier, the dollar had hit a three-year low due to Trump’s tariff threats and weak US inflation data, increasing Fed cut bets.
The euro fell to $1.15 from a 3.5-year high of $1.163, pressured by Middle East tensions and diverging ECB-Fed outlooks. The ECB signaled a pause, while the Fed is expected to cut rates, possibly by September.
The Japanese yen strengthened toward 143 per dollar, gaining for a third day as investors fled to safety. BOJ Governor Ueda said rate hikes are possible if inflation moves toward the 2% target.
The British pound dropped to $1.35 from a high of $1.363, as investors turned cautious. UK GDP shrank 0.3% in April, worse than the expected 0.1% drop, mainly due to lower US exports post-tariffs. Softer data raised expectations of BOE rate cuts, though dollar weakness offered some support.
Gold rose over 1% to above $3,420, nearing record highs on safe-haven demand after Israel’s strike on Iran. The attack targeted Iran’s nuclear sites, raising fears of regional escalation. Uncertainty around Trump’s trade policy and softer US inflation data added to rate cut expectations, supporting gold.
Silver fell toward $36 after reaching a 13-year high, as investors booked profits. Still, demand remains strong, driven by industrial use in solar and electronics. A fifth straight yearly deficit is expected, though narrowing by 21% in 2025.
Brent crude climbed above $78 before settling near $74, the highest since February, amid fears of supply disruption due to the Israel-Iran conflict. Israel warned of retaliation; the US began a regional evacuation. Concerns about the Strait of Hormuz and a larger US crude draw supported prices. Fed cut hopes added to optimism. Oil is set for its best week since February 2022.
US stocks dropped Friday as tensions in the Middle East triggered risk-off moves. The S&P 500 and Nasdaq fell 0.7%, while the Dow lost nearly 500 points. Israel’s strike on Iran spurred safe-haven flows. Airline stocks dropped sharply: American Airlines fell 10%, Delta 6.5%, and United 10% weekly. Despite Friday’s dip, major indexes are still up for the week: S&P 500 +0.7%, Nasdaq +0.7%, Dow +0.5%.
The US dollar weakened across the board as markets grew more confident in a potential Fed rate cut, following disappointing personal spending and income data.
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Dollar Hits 3-Year Low, Euro and Pound Gain (30 June - 4 July)The dollar index fell to 97.1, its lowest since Feb 2022, on Fed cut bets and Powell’s dovish tone. US PCE fell 0.3%, weakening the dollar against the euro and pound. The euro rose above $1.17, supported by the ceasefire and Germany’s budget plans. The pound climbed above $1.374 on BoE cut signals. The yen held near two-week highs on dollar weakness and firm Japan inflation.
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US Personal Income and Spending Decline in MayPersonal income in the United States fell by 0.4% in May, equivalent to a $109.6 billion decrease, according to data from the US Bureau of Economic Analysis.
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