
European currencies capitalized on a softening greenback overnight. Tensions in the Middle East stabilized following a temporary pause in hostilities between the U.S. and Iran over the weekend, alongside reports of an Israel-Lebanon peace deal. Easing geopolitical tensions enabled GBP/USD and EUR/USD to recover above their key 1.32 and 1.14 levels, while USD/CHF returned below 0.80. The main highlight was Andy Burnham, the frontrunner to succeed Keir Starmer as British Prime Minister, using his first major policy to prioritize fiscal responsibility in his 10-year economic and devolution strategy under the banner of “Manchesterism.”
In Southeast Asia, the IDR was bolstered by the Indonesian government’s liquidity support for the banking sector. In addition to extending the placement of IDR 281 trillion in state cash funds within state-owned banks through the end of December 2026, an additional IDR 100 trillion in standby funds will be set aside at Bank Indonesia. The finance ministry reported that the state budget deficit reached 0.7% of GDP in May, on track to remain below the statutory 3% ceiling by year-end amid low oil prices. Sentiment improved last Friday, when the finance ministry scaled back President Prabowo Subianto's flagship Free Nutritious Meals program, which will be reviewed every two months for implementation and budget absorption following intense scrutiny over a corruption investigation.
In Northeast Asia, the JPY’s weakest level in 40 years is attracting attention despite the KRW’s steeper losses. The JPY has brushed aside the return of oil prices to around pre-war levels. Markets appear to be hedging the USD’s post-PCE depreciation against other currencies, with JPY. If so, the Ministry of Finance needs to remind markets of the high risk of direct currency intervention supported by the US Treasury. Bank of Japan officials have openly discussed the estimated 2% neutral rate as a goal of the current hiking cycle. The JPY could get some relief if Fed Chair Kevin Warsh, amid lower energy prices, dilutes the latest hawkish FOMC dots to make his case against forward guidance at the European Central Bank Forum in Sintra tomorrow.
Quote of the Day
“Truth never damages a cause that is just.”
Mahatma Gandhi
June 30 in history
Mahatma Gandi’s first arrest in 1914 for campaigning for Indian rights in South Africa.



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