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War in the Middle East escalates, oil prices are soaring all the way, inflation is hindered again
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Official Website]: War in the Middle East escalates, oil prices are soaring all the way, and inflation is hindered again." Hope it will be helpful to you! The original content is as follows:
On June 18, during the trading session in Asia on Wednesday, spot gold was trading around $3,389.80 per ounce, approaching $3,400 per ounce; geopolitical tension in the Middle East continued, and Iranian supreme leader Khamenei said that he must strongly attack Israel and never eouu.cnpromise; U.S. crude oil rose nearly 1%, trading around $73.76 per bin. Oil prices benefited from geopolitical tensions, but also benefited from API showing that inventory data fell by more than 10 million barrels, the largest single-week decline since the week of August 25, 2023.
As the war continues, the U.S. military is strengthening the region's military, deploying more fighter jets, and expanding the deployment of other fighters, which has intensified geopolitical risks this week. Several central banks held meetings this week.
Economic data show that as trade and inflation uncertainty continues, U.S. consumers become more cautious, while investors fear that Israel and Iran’s battles escalate into broader regional conflicts.
In terms of data, U.S. retail sales were weaker than expected in May, but consumer spending was still supported by steady wage growth.
Uto Shinohara, senior investment strategist at MesirowCurrencyManagement, said: "The U.S. has shown less traditional risk aversion recently, largely due to the U.S. itself creating market uncertainty through changing and unclear trade policies. However, the U.S. dollar has regained support under the influence of an external global risk event of escalating conflict in the Middle East. This was reflected when the conflict broke out last Friday, and today the tensions have increased, the U.S. dollar has gained support again."
As the Israeli-Iran conflict enters its fifth day, the overall riskEmotions remain fragile. At the end of the two-day monetary policy meeting, the Bank of Japan kept its short-term interest rate unchanged at 0.5% as expected and decided to slow down its balance sheet reduction next year.
After the decision was announced, the yen fluctuated between the rise and fall, turning to a decline during the press conference of President Ueda Kazuo. The dollar rose 0.4% against the Japanese yen to 145.32 yen at the end of the trading day. Japanese Prime Minister Shigeru Ishiba and U.S. President Trump have not reached a trade deal.
The development of the situation in the Middle East has caused tensions among investors, and Trump said on Tuesday that he hopes the nuclear dispute with Iran "really ended" and said he may send senior U.S. officials to meet with Iranian officials.
The White House said on Monday that due to the situation in the Middle East, Trump will leave the G7 summit in Canada a day early, while Trump asked the National Security Council to prepare in the war situation room.
Asian Market
The Bank of Japan unanimously decided on Tuesday to keep short-term interest rates unchanged at 0.5%, while adhering to its current bond reduction plan until March 2026. Looking ahead, the central bank has launched a new bond purchase schedule in fiscal year 2026, planning to reduce monthly purchases of 200B yen per quarter and bring the total to 2T yen per month by March 2027.
The Bank of Japan lowered its growth prospects in a statement, noting that the Japanese economy “could slow down” in the short term as overseas economy slows and domestic corporate profits are weak. While loose financial conditions should provide some support, central banks are expected to recover only moderately later as global growth recovers.
In terms of inflation, the impact of rising food and import prices is “expected to weaken”, and the basic CPI may remain “sluggish” due to the slowdown. However, the bank expects inflation to gradually rebound over time, supported by rising medium- and long-term inflation expectations and a growing "feelings of labor shortage" following the economic recovery.
The Bank of Japan also acknowledged that the outlook for the global trade and policy environment was “extremely uncertain” and warned of spillover effects on Japan’s financial markets and inflation outlook. The statement stresses the need to pay close attention to foreign exchange development and its wider impact.
Japan's trade data in May showed that its export sector was under increasing pressure, with overall exports falling -1.7% year-on-year to 8.135T yen. Imports fell -7.7% year-on-year to 8.773T yen. The resulting trade deficit is -637.6B yen.
What is particularly worrying is that due to the direct impact of US tariffs, exports to the United States fell sharply by -11.1%, and U.S. automobile shipments plummeted by -24.7% year-on-year.
Although the trade surplus with the United States is 451.7B yen, the bilateral trend is negative. Imports from the United States fell -13.5% year-on-year. Japanese exporters are now struggling to impose a 25% tariff on automobiles and auto parts, and a baseline tax of 10% on all other goods. Steel andAluminum products were also subject to a 50% tariff in early June.
After seasonally adjusted, exports increased by only 0.1% month-on-month, while imports decreased by -0.3% month-on-month. The trade difference was narrow but was still negative -305B yen.
European market
Investor confidence in the euro zone soared in June, with the ZEW economic prosperity index in Germany and the wider region easily exceeding expectations.
Germany's overall sentiment index jumped from 25.2 to 47.5, far higher than expected 34.5, while the current situation index improved from -82 to -72. Throughout the euro zone, the sentiment index rose from 11.6 to 35.3, and the current situation index climbed 11.7 points to -30.7.
ZEW President Achim Wambach attributed the “real improvement” to the growth of investment and consumer demand, adding that the fiscal policy announced by the new German government seemed to support confidence.
The data suggest that the long-term stagnation period in Europe's largest economy may be nearing its end. Coupled with the recent ECB rate cuts, the long-awaited recovery momentum may be strengthening.
U.S. market
U.S. retail sales in May fell by more than expected, down -0.9% month-on-month to USD715.4B, far lower than expected -0.6% month-on-month decrease.
The weakness is widespread, with sales except automobiles falling -0.3% month-on-month, and sales without gasoline fell -0.8% month-on-month. Even the core control group (excluding automobiles and gasoline) showed a month-on-month decline of -0.1%, indicating a slowdown in disposable consumption.
Although the March-May period rose 4.5% year-on-year, today’s data has sparked new doubts about the strong momentum of U.S. consumer spending enters the summer.
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