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July 1st - Eurozone inflation fell far more than expected in June, further easing pressure on the European Central Bank (ECB) to raise interest rates again this month to curb rapid price increases. The Eurozone's overall inflation rate fell to 2.8% in June from 3.2% in May, below the expected 3.0%; inflation in food, energy, and services prices all slowed. Meanwhile, inflation excluding volatile food and fuel prices fell to 2.4% from 2.6%, with services price inflation falling to 3.2% from 3.5%. Although the June figures remain well above the ECB's 2% target, recent oil price declines driven by market bets on a US-Iran peace agreement have fueled optimism that price pressures may be easing and the widespread negative impact of soaring energy prices will remain limited. In fact, several ECB policymakers have stated that the ECB does not need to rush into action this month, and policymakers have time to observe the evolution of price pressures.

Following the release of Eurozone inflation data, the market slightly reduced its bets on a European Central Bank rate hike, now expecting a 23 basis point increase before the end of the year.

July 1st - Eurozone inflation fell to 2.8% in June, a larger drop than expected. This is a major boost for the European Central Bank (ECB) as it struggles to curb price increases stemming from the Iran war. Preliminary data released Wednesday by Eurostat showed June inflation was lower than the 3% forecast by economists in a Reuters poll and also lower than May's 3.2%. To curb inflationary pressures, the ECB raised interest rates by 0.25 percentage points to 2.25% last month, its first rate hike since 2023. June marked the fourth consecutive month that inflation in the G21 countries exceeded the ECB's 2% medium-term target. Prior to the June data release, traders, based on implied levels in swap contracts, expected the ECB to raise rates by another 0.25 basis points before the end of the year.

Eurozone bond yields fell slightly after inflation data came in below expectations, with the yield on Germany's 2-year government bond falling 1 basis point to 2.523%.

The Eurozone's core CPI rose 0.2% month-on-month in June, down from 0.3% in the previous month.

The Eurozone's core CPI annual rate preliminary reading for June was 2.2%, down from 2.3% in the previous month.

On July 1st, European Central Bank (ECB) Vice President Aleksandar Vujic stated that the bank will likely await further data, such as the latest macroeconomic forecasts to be released at its September meeting, before deciding on its next interest rate move. Speaking during the ECB meeting in Portugal, he said, "We must wait for the data to come out until the July meeting; then in September, we will have new forecast data and make a decision based on the further data received at that time." Vujic pointed out that the central bank will not pre-commit to a specific interest rate path. He noted that the June inflation data so far has not yielded any surprises. The ECB last raised interest rates at its June meeting, when it increased them by 25 basis points.

According to reports, the Iranian and US negotiating teams did not hold face-to-face talks, but instead held indirect talks in Qatar through mediators on a rotating basis.

ECB Governing Council member Kochel: The threat of inflation has decreased, but it has not been completely contained. The next decision will be to raise interest rates or keep them unchanged.

July 1st - Monex Europe analysts stated that the euro faces further downside risk if Wednesday's Eurozone inflation data falls short of expectations and European Central Bank President Christine Lagarde cools expectations for further rate hikes. In a report, they stated that inflation data is likely to be weaker than anticipated, given that data from Germany, France, and Italy came in weaker than expected. They suggested this could reinforce the view that the ECB will "stop there" after last month's rate hike. Lagarde may also confirm this view at the ECB forum in Portugal on Wednesday.

ECB Governing Council member Nagel: The rise in German energy prices has produced almost no second-round effect.

ECB Governing Council member Nagel: Inflation remains too high.

ECB Governing Council member Winsch: If there is no significant second-round effect, one rate hike may be sufficient.

Fitch Ratings: Indonesia faces rising pressure on market confidence and foreign exchange buffers.

PMI data showed that UK manufacturing activity slowed in June, despite a boost in output as companies stockpiled goods in anticipation of rising prices and supply chain disruptions caused by the Middle East conflict. The final UK manufacturing PMI fell to 52.5 in June, down from the preliminary reading of 53.1 and May's 53.9. A reading above 50 indicates expansionary activity. The survey showed the output sub-index rose to 52.6 (previous reading 52.2), the highest level since September 2024. However, growth in new orders slowed significantly, consistent with the findings of a survey released last week by the Confederation of British Industry. S&P analyst Rob Dobson said, "UK manufacturing ended the second quarter on a positive note. Whether this momentum can be sustained is increasingly being watched. Manufacturers are currently benefiting from strategic stockpiling by customers who are looking to hedge against supply chain disruptions and anticipated price increases. But the slowdown in the growth rate of new order intake suggests that this boost is beginning to wane."

July 1st - Investinglive reported that European Central Bank (ECB) Governing Council member Nagel stated that all options remain open for interest rate decisions in July and September, meaning future decisions will remain highly dependent on various data scenarios. Given the declines in inflation data from France, Germany, and Italy, today's Eurozone inflation data is unlikely to show an unexpected increase. Therefore, the possibility of an ECB rate hike in July is extremely low. Nagel also reiterated that the ECB's June rate hike should not be interpreted as a "precautionary measure." In other words, this decision was not merely a precautionary measure to address future inflation risks, but rather based on the central bank's assessment of the current economic situation and inflation trends.

The onshore yuan closed at 6.7935 against the US dollar at 16:30 on July 1, down 83 points from the previous trading day.