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The BoJ on Tuesday is expected to keep interest rates unchanged at 0.5% and slow the reduction in its bond purchases from FY2026. The focus will be on the tapering plan.

There are little expectations that the BoJ will make changes to its current tapering plan and will announce changes just for next fiscal year cutting the quarterly taper size to around 200 billion yen.

If the central bank announces changes to the current fiscal year, that will be a surprise and will move the yen a lot. A faster tapering pace would give the JPY a boost, while a slower pace would weaken it.

On the interest rates front, the market is pricing just 17 bps of tightening this year which is basically 50% chance of a 25 bps hike by year-end. The commentary from BoJ speakers has been roughly the same and there have been no hints to a rate adjustment coming anytime soon.

They continue to place a great deal on the US-Japan trade deal and the evolution of inflation. Underlying inflation has been rising steadily in Japan and that should keep the rate hike probabilities high, especially considering that we will eventually get to a trade deal. Therefore, watch out for more clear signals on interest rates changes and the timing.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

China National Bureau of Statistics (NBS) spokesperson:

• Geneva discussions benefit trade relations between China, US

• China online sales promotions boosted retail sales in May

• China trade program boosts retail sales in May
• Many uncertainties in the international environment, foundation of economic recovery needs to be strengthened
• Policy toolkit is well-stocked, has the flexibility to adjust macro policies according to changing circumstances
• Overall level of prices still at a low level, which affects enterprises, employment and incomes
• There is difficulty in recruiting workers in some sectors and a high level of pressure on employment for some groups
• Still some pressure on maintaining stable employment, primarily due to the complex and changing external environment
• Complex external environment impacts China labor market
• Due to factors such as increased uncertainty in trade policies, it has been particularly challenging for China’s economy to maintain stable growth since the second quarter

Data is here:

• China Industrial Output May 2025 +5.8% y/y (expected 5.9%, prior +6.1%)

Retail slaes growth in May was the fastest since December 2023

This article was written by Eamonn Sheridan at www.forexlive.com.

Headlines:

• Crude oil consolidates as supply fears ease
• Israel: We Destoryed One-Third of Iranian Regime’s Missile Launchers
• EU reportedly prepared to accept flat 10% tariffs by US under clear conditions
• India says aiming to sign interim deal with the US before 9 July
• US reportedly pushes Vietnam to reduce reliance on Chinese tech in tariff talks
• How have interest rates expectations changed following the surge in oil prices?
• ECB’s Nagel says not sensible to signal either pause or rate cut for the time being
• ECB’s de Guindos: EUR/USD exchange rate at 1.15 is no big obstacle on inflation target
• Italy May final CPI +1.6% vs +1.7% y/y prelim
• Switzerland May producer and import prices -0.5% vs +0.1% m/m prior
• Eurozone wage costs seen easing in Q1 2025
• China to hold a NPC Standing Committee meeting June 24 to 27

Markets:

• NZD leads, CHF and JPY lag on the day
• European equities higher; S&P 500 futures up 0.6%
• US 10-year yields up 1.8 bps to 4.444%
• Gold down 0.5% to $3,413.62
• WTI crude down 3.4% to $70.45
• Bitcoin up 2.1% to $106,981

As we get into the new week, the fears surrounding the tensions in the Middle East are beginning to ebb. Or at least markets are looking past that and wanting to move on already, especially as concerns surrounding oil supplies are seen easing.

The tensions between Iran and Israel remain high but investors are seeking some cautious optimism in fading the geopolitical situation for now.

Equities are moving higher and the dollar is slightly lower at the balance to start the week.

European indices are seeing modest gains while S&P 500 futures are up 0.6% in trying to start up a bounce back following last week’s decline.

EUR/USD nudged higher from 1.1540 earlier to 1.1575 while AUD/USD is up 0.5% to 0.6520 as buyers seek another attempt to firmly clear the 0.6500 mark. Besides that, there were light changes for USD/JPY, GBP/USD, and USD/CHF with price holding flattish at 144.13, 1.3580, and 0.8111 respectively.

As the market fears ebb, gold is seen down back to $3,413 while oil is falling further as it moves back on approach towards $70.

With market players looking to move on, the focus now slowly shifts back towards upcoming key central bank meetings this week. On the list this week, we’ll have the BOJ, Fed, SNB, and BOE all announcing their respective policy decisions in the coming days.

This article was written by Justin Low at www.forexlive.com.

Iranwire is reporting that “in an exclusive interview, a high-ranking Iranian diplomat revealed that
Iran’s military and political leadership are prepared to give up
uranium enrichment to preserve the regime.”

The diplomat speaking on condition of anonimity said that they need a face-saving solution.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The latest news on the tariffs front is that the EU is reportedly prepared to accept a flat 10% tariff rate by US under certain conditions. The EU has been the most difficult one to deal with and Trump at some point tried to force them to speed up negotiations with a 50% tariff threat.

From a market perspective, tariffs are no longer that much of a deal because a 10% average tariff rate has been already priced in. We also got reports from businesses that they plan with a 10% to 20% tariff rate. But what about the July 8th deadline that was set back in April for trade talks?

US Treasury Secretary Bessent recently said that the deadline can be extended for countries negotiating in good faith with the US. Therefore, the deadline doesn’t matter anymore.

So, we are left with the markets continuing to price in better global growth ahead. There are many positive drivers including trade deals eventually getting done, expansionary fiscal policies and central bank easing.

One risk for the growth picture could be the failure of the Trump’s bill. That would trigger a repricing in growth expectations and weigh on risk assets. But for now, there is very low probability of the bill not passing.

The other risk to keep an eye on is inflation. Although we are still seeing disinflation in the data, keep in mind that inflation is a lagging indicator.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

More to come..

This article was written by Justin Low at www.forexlive.com.

• Bilateral trade talks are progressing
• Sticking to timeline of signing a deal before the fall of 2025

Even without an interim deal, you’d imagine that the US will surely kick the can down the road so long as negotiations are at least still taking place. The TACO trade is on between now and 9 July. 23 days to go. Tick tock, tick tock.

This article was written by Justin Low at www.forexlive.com.

That compares with the 4.1% year-on-year reading in Q4 2024. As for labour costs, that is seen at 3.4% year-on-year as well in Q1 2025. Comparatively, labour costs were 3.8% year-on-year in the final quarter of last year. Overall, the trend since last year continues to show further easing in wage pressures and that’s been helpful in supporting the ECB’s easing cycle.

This article was written by Justin Low at www.forexlive.com.

Investor Update –

8:55 AM, Greenwich Mean Time (GMT)

Monday, June 16, 2025

Israel’s military spokesperson announced that the IDF has destroyed approximately one-third of Iran’s missile launchers, targeting critical assets tied to the Iranian regime.

This is not only a tactical blow but also a strategic signal, indicating a possible turning point in the pace and direction of the broader conflict.

What This Means if the Trend Continues:

1. Iran’s Retaliatory Capability May Be Eroding:

   • The reported scale of destruction has already slowed the pace of Iran’s response, signaling potential disruption in their operational capacity.

   • With fewer launch capabilities, Iran may lose leverage in further escalation scenarios and find itself under increasing pressure to return to the negotiating table sooner than expected.

2. Potential De-escalation Window Opens:

   • If the missile launcher degradation continues, Tehran may opt for strategic restraint to avoid further losses, opening the door for diplomatic engagement under pressure.

   • This dynamic could reduce the probability of a full-scale regional war, at least in the short term.

3. Oil Prices Could Rebalance:

   • While initial fears drove energy prices higher, a reduction in Iran’s strike capabilities could cool market anxieties, easing upward pressure on oil and related commodities, unless a new actor escalates.

4. Markets May Shift Focus to Political Resolution:

   • Equities in energy, defense, and emerging markets may stabilize if investors begin pricing in a de-escalation phase or negotiations.

   • Risk-on appetite could return selectively, like it has already today on the futures market, especially in sectors hit hardest by initial war concerns.

Strategic Takeaway:

If Israel continues to degrade Iran’s missile infrastructure while avoiding direct provocation of a wider war and increased civilian casualties, this may accelerate diplomatic pressure on Tehran, and curb Iran’s ability to continue symmetrical retaliation. For investors, this could mark a shift from hedging geopolitical risk to positioning for potential relief rallies, especially if backchannel talks or global mediation efforts emerge.

As always, stay vigilant. Even with signs of military degradation, unexpected escalation, by Iran or its proxies, remains a wildcard. And no one has a crystal ball so watch the price action.

This article was written by Itai Levitan at www.forexlive.com.

Rate cuts by year-end

• Fed: 47 bps (99% probability of no change at the upcoming meeting)
• ECB: 19 bps (95% probability of no change at the upcoming meeting)
• BoE: 48 bps (90% probability of no change at the upcoming meeting)
• BoC: 24 bps (78% probability of no change at the upcoming meeting)
• RBA: 74 bps (73% probability of rate cut at the upcoming meeting)
• RBNZ: 27 bps (82% probability of no change at the upcoming meeting)
• SNB: 45 bps (75% probability of rate cut at the upcoming meeting)

*for the SNB, the rest of the probability is for a 50 bps cut

Rate hikes by year-end

• BoJ: 17 bps (100% probability of no change at the upcoming meeting)

The surge in oil prices saw a bit of a hawkish repricing in interest rates expectations. The change is negligible and with the expected de-escalation, we should see a pullback in oil prices.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior +1.9%
• HICP +1.7% vs +1.9% y/y prelim
• Prior +2.0%

These are lower revisions to the preliminary figures. It doesn’t change anything for the ECB but continued easing in inflation will keep the doves at the central bank in charge.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

USDJPY is in focus again this week for foreign exchange traders, as both geopolitical and fundamental factors are set to keep volatility high, and one of the biggest potential movers for the pair is Tuesday’s key interest rate update from the Bank of Japan.

The bank has pulled back from hawkish rhetoric in recent months, with US tariffs increasing uncertainty for Japanese markets, and that uncertainty has increased in the last few days with the conflict in the Middle East between Israel and Iran. Inflation had been a major concern for the bank, but has now taken a back seat to larger economic concerns going forward, and with the market fully pricing in another ‘hold’ at 0.5% from the bank, most FX traders are expecting to see moves in the currency on the back of any forward guidance that we receive from the Monetary Policy Statement and the subsequent Press Conference.

Anything more hawkish from Governor Kazuo Ueda should see the Yen appreciate, with trendline support on the hourly chart around 142.90 likely to provide the initial downside target, whereas a more cautious and less hawkish stance could see the Yen pull back against the dollar, with initial resistance now sitting just under 145.00. Traders are expecting to see substantial moves around the rate call but are also aware that further geopolitical updates could make the impact a more shorter-term opportunity than is normal.

Resistance 2: 145.46 – June High
Resistance 1: 144.96 – Trendline Resistance

Support 1: 142.89 – Trendline Support
Support 2: 142.10 – May Low

The post Trade USDJPY on the Bank of Japan Interest Rate Decision first appeared on IC Markets | Official Blog.