Global Central Banks Hold Steady as Inflation Eases and Trade Risks Rise

Here’s your latest economic snapshot:

• Bank of Japan kept its rate at 0.5%
• Eurozone annual inflation was confirmed at 1.9%
• U.S. annual inflation rose to 2.4%
• Fed held rates steady at 4.25%–4.50%
• Bank of England held rates at 4.25%

Stay informed with these critical updates!

Market Recap:

Japan Interest Rate Decision: The Bank of Japan kept its interest rate steady at 0.5% in June, as expected, citing global risks and trade uncertainty with the U.S. The central bank reaffirmed plans to slowly reduce bond purchases through 2027, signaling a cautious move away from ultra-loose policy.

Eurozone Consumer Price Index (CPI) YoY: Eurozone annual inflation was confirmed at 1.9% in May 2025, down from 2.2% in April and below the ECB’s 2.0% target for the first time since September 2024. The decline was mainly due to a sharp drop in services inflation to 3.2% from 4.0%—its lowest since March 2022. Energy prices continued falling (-3.6% YoY), non-energy industrial goods inflation held steady at 0.6%, while food, alcohol, and tobacco prices rose to 3.2% from 3.0%. Core inflation, excluding food and energy, eased to 2.3%, the lowest since January 2022.

U.K. Consumer Price Index (CPI) YoY: U.S. annual inflation rose to 2.4% in May 2025, marking the first increase in four months but remaining below forecasts of 2.5%. The rise was driven by higher costs for food, transportation services, and vehicles, while shelter inflation eased slightly. Energy prices fell again, with gasoline down 12% year-on-year. Core inflation held steady at 2.8%, defying expectations of a rise, and both headline and core monthly CPI increased by just 0.1%, undershooting forecasts. Overall, inflation remains subdued despite a modest rebound in some categories.

Fed Interest Rate Decision: The Fed held rates steady at 4.25%–4.50% for the fourth straight meeting in June 2025, as expected, maintaining a cautious stance amid lingering uncertainty around Trump-era policies on tariffs and immigration. While the economic outlook has become slightly clearer, risks remain. The Fed still projects two rate cuts in 2025, but only one 25 bps cut in both 2026 and 2027. It also trimmed its GDP growth forecasts and raised its inflation outlook, now seeing PCE inflation at 3.0% in 2025 and 2.4% in 2026.

U.K. Interest Rate Decision: The Bank of England held rates at 4.25% in June with a 6–3 vote, as three members pushed for a 25 bps cut. The BoE flagged weak UK growth and a loosening labor market, while warning of two-sided inflation risks—especially from energy price spikes and U.S. tariff threats. Inflation is expected to stay near current levels this year before easing in 2026. The Bank signaled it will maintain a cautious approach to any future policy changes.

Oil and Commodities:

Brent Crude: Brent crude dropped over 2%, yet remained near last week’s peak of $77 a barrel — the highest level since January.

Gold: Gold prices jumped to $3,437.21 amid safe-haven demand.

Currency Watch:

EUR/USD: The euro rose 0.3% at $1.1534

GBP/USD: Sterling held steady at $1.3471, trimming earlier gains after UK retail sales posted their steepest decline since December 2023.

USD/JPY:  The euro rose 0.3% at $1.1534

Bitcoin fell to $98,930. Ethereum dropped to $2,118

Preview of the Upcoming Week:

June 23, 2025

U.S. Manufacturing Purchasing Managers Index (PMI: The Manufacturing PMI in the United States held steady at 52 in June, indicating moderate growth in the manufacturing sector. According to forecasts from analysts, this level is expected to remain around 52 by the end of the current quarter. Looking further ahead, the PMI is projected to gradually slow, trending closer to 50 in 2026 and slightly improving to 51 in 2027, suggesting a possible stabilization but at a more modest pace.

Given this outlook, traders should watch key U.S. industrial and growth-sensitive assets. Focus on currency pairs like USD/CAD and USD/MXN, which are influenced by manufacturing activity and trade flows. In equities, pay attention to industrial stocks such as Caterpillar, 3M, and Boeing, as well as sector ETFs like the Industrial Select Sector SPDR (XLI). For indices, the Dow Jones Industrial Average (DJIA), which has strong exposure to manufacturing companies, and the S&P 500 are important to monitor for broader market sentiment tied to U.S. economic health. Additionally, commodities like copper and oil may also react to changes in manufacturing demand.

U.S. Services Purchasing Managers Index (PMI): The Services PMI in the United States declined slightly to 53.10 in June from 53.70 in May, indicating a modest slowdown in the expansion of the services sector. Analysts expect the PMI to hover around 53.00 by the end of this quarter. Looking further ahead, the Services PMI is forecasted to ease toward 50.00 in 2026, signaling a potential stabilization at neutral growth, with a slight rebound to 52.00 in 2027.

Given this trend, traders should keep an eye on assets tied closely to the U.S. services economy. Currency pairs like USD/JPY and EUR/USD may reflect shifts in economic sentiment influenced by the services sector. In equities, focus on sectors such as consumer discretionary, healthcare, and financials, including major companies like Amazon, JPMorgan Chase, and UnitedHealth. Sector ETFs like the Consumer Discretionary Select Sector SPDR (XLY) and Financial Select Sector SPDR (XLF) are also worth watching. For broader market exposure, the S&P 500 index remains a key barometer of the services-driven U.S. economy. Additionally, consider monitoring bond markets as shifts in services activity can impact interest rate expectations.

June 24, 2025

U.S. Fed Chair Powell Testifies: Federal Reserve Chair Jerome Powell (Feb. 2018 – Feb. 2022) is set to deliver a testimony on the economic outlook and recent monetary policy decisions before the Joint Economic Committee in Washington, D.C. The session consists of two parts: a prepared statement followed by a Q&A segment with lawmakers. While the initial statement tends to be scripted and already priced in by markets, the unscripted Q&A often triggers heightened volatility, as Powell’s responses may reveal new insights into the Fed’s future policy direction.

Traders should closely monitor U.S. dollar pairs such as EUR/USD, GBP/USD, and USD/JPY, which often react sharply to Powell’s comments. U.S. equity indices like the S&P 500 and Nasdaq can also swing significantly depending on the market’s interpretation of Powell’s tone—whether dovish or hawkish. Bond yields, especially the 10-year Treasury, are highly sensitive to any signals regarding interest rate policy. Gold and other safe-haven assets may also move rapidly during the Q&A session if uncertainty increases.

June 26, 2025

U.S. Durable Goods Orders MoM: Durable Goods Orders in the U.S. fell sharply by 6.3% in April 2025 compared to the previous month, pointing to a significant slowdown in demand for long-lasting manufactured goods. However, analysts expect a rebound, with orders projected to rise by 2.4% by the end of the current quarter. Over the longer term, growth is expected to moderate, trending around 1.7% in 2026 and just 0.3% in 2027, indicating a gradual weakening in business investment momentum.

This data is key for assessing the health of the industrial and manufacturing sectors. Traders should watch the U.S. dollar, particularly against commodity-linked currencies like CAD and AUD. In equities, focus on companies tied to capital goods and heavy equipment—such as General Electric, Honeywell, and Deere—as well as the broader industrial sector. ETFs like the Industrial Select Sector SPDR (XLI) and transportation-focused iShares U.S. Transportation ETF (IYT) may also be impacted. Additionally, bond yields and indices like the Dow Jones and Russell 2000 could show volatility depending on how the market interprets this swing in durable goods demand.

U.S. Gross Domestic Product (GDP) QoQ: The U.S. economy contracted by 0.2% in the first quarter of 2025 compared to the previous quarter, signaling a brief pullback in growth. However, analysts anticipate a strong rebound, with GDP growth expected to reach 3.5% by the end of this quarter. Looking ahead, growth is forecasted to normalize, trending around 2.0% in 2026—consistent with long-term expectations for a mature economy.

This shift in GDP momentum is crucial for market sentiment. Currency traders should monitor USD performance, especially in pairs like EUR/USD and USD/JPY, which tend to react strongly to growth surprises. In equities, cyclical sectors such as technology, consumer discretionary, and financials may benefit from stronger GDP prints—look at names like Apple, Visa, and Home Depot. Broader indices like the S&P 500 and Nasdaq are likely to reflect overall growth expectations. Bond markets may also react, with rising GDP figures potentially pushing yields higher. Additionally, commodities like oil and copper, which are sensitive to economic growth, could see increased demand.

June 27, 2025

U.S. Core PCE Price Index MoM: The U.S. Core PCE Price Index (MoM)—the Federal Reserve’s preferred gauge of underlying inflation—held steady at 0.1% in April, signaling stable but subdued price pressure. Analysts expect this pace to continue through the end of the quarter. Looking further ahead, the monthly inflation rate is projected to remain around 0.1% in 2026 and edge slightly higher to 0.2% in 2027, suggesting inflation is expected to stay broadly under control.

This stability in core inflation reinforces expectations for a cautious Fed when it comes to rate adjustments. Traders should watch the U.S. dollar, particularly in pairs like GBP/USD and USD/CHF, which often react to shifts in inflation outlook. In equities, interest-rate sensitive sectors such as real estate (e.g., REITs) and technology may benefit from contained inflation and steady monetary policy. Bond markets are also closely tied to PCE data—Treasury yields may remain stable or drift lower if inflation stays subdued. Gold prices could gain support as well if markets interpret the data as lowering the chance of future rate hikes.

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