Markets stayed calm as the weekend approached, with uncertainties keeping them within a narrow range. Traders remained cautious due to concerns about possible US involvement in the Middle East conflict. Japan stated that it wouldn’t strictly follow the 9 July deadline in its trade talks with the US. Meanwhile, China and the EU were engaged in intense discussions about trade issues, and reports indicated that Audi might set up a plant in the US in response to US tariffs.

Economic Updates

Economic news included Japan showing a slow economic recovery with some weaknesses, alongside plans to cut JGB issuance by 3.2 trillion yen for 2025. In the UK, retail sales in May dropped 2.7%, against an anticipated decrease of 0.5%. Germany’s May producer price index (PPI) was slightly better than expected at -0.2% month-over-month, while business confidence in France remained stable at 96 in June. The euro and pound performed best among major currencies. US 10-year yields rose by 3.2 basis points to 4.423%. European stocks gained between 0.7% and 1.1%, in contrast to the S&P 500 futures, which fell 0.1%. In commodities, gold decreased by 0.5% to $3,353.09, WTI crude rose by 0.2% to $73.99, and Bitcoin increased by 1.5% to $105,935. The earlier commentary reflects a mostly stagnant market as the week ended, with geopolitical concerns affecting sentiment. This environment showed little movement in stocks and commodities, driven more by worry than solid news. Major foreign exchange pairs showed slight adjustments, with European currencies rising slightly, likely in response to mixed but generally stable regional data. UK retail sales for May were much worse than expected—almost three times the forecasted decline. This suggests that domestic demand might be weaker, possibly due to ongoing cost-of-living pressures or cautious consumer sentiment before upcoming events. If this trend continues without a broader decrease in inflation, short-term rate expectations may stay the same. German producer prices slightly above forecasts indicate marginal cost pressures in the industry, but not enough to prompt market shifts based solely on inflation concerns. French business confidence at 96 hints at a stable economy, neither significantly worsening nor improving. Japan plans to reduce its government bond supply by over three trillion yen next year, likely to ease the impact of rising borrowing costs while ensuring enough liquidity. Japan’s communications about moderate improvement but also fragility are clear. Their hesitation to set a date for trade talks suggests prolonged negotiations that could affect risk outlooks for the summer.

Corporate Adjustments

On the corporate side, there are reports of a new Audi plant potentially in the U.S., indicating that companies are adjusting their manufacturing and logistics in light of current and expected tariffs. This news could influence medium-term inflation expectations, depending on how much this reshoring raises domestic input costs. US interest rates rose slightly, with a 3.2 basis-point increase in the 10-year treasury, signaling mild changes in growth or inflation assumptions rather than a full market adjustment. In the equities market, European indices posted gains while US stock futures ticked down. This divergence can signify positioning ahead of key economic releases or expectations of regional outperformance driven by central bank policies. Gold’s decline and the modest increase in oil prices indicate that commodities are not seeing fresh interest despite ongoing geopolitical worries. This may suggest that investors believe foreign events, while concerning, are not yet causing significant economic disruption. Bitcoin’s rise above $105,000 may have less to do with fundamentals and more with traders rotating into or using it as a safe haven amid uncertainty. Looking at momentum and implied volatility across different asset classes, it’s challenging to identify a clear direction. Retail sales shortfalls and quiet bond issuance do matter, but they haven’t significantly changed yield curves or major currencies from their recent patterns. As trade tensions rise and macro surprises persist, conviction in the market is likely to remain low. This uncertainty influences how risk is managed, making it hard to justify large directional bets unless upcoming data shows a clear trend or significant outlier. Monitoring auction activity, economic releases, and options volume should help refine strategies and risk appetite moving forward, especially watching whether implied volatility remains low or starts to increase. The euro and pound’s relative strength may persist unless significant policy divergence disrupts pricing in the interest rate differentials. We will closely observe overnight positioning for any noteworthy shifts in flows that might suggest broader market changes. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now