The euro rose modestly in European trading on Thursday against a basket of global currencies and is on track for its first gain in three sessions against the US dollar, benefiting from a softer greenback ahead of the release of the June US employment report.

Following less hawkish comments from European Central Bank President Christine Lagarde and weaker-than-expected eurozone inflation data for June, market expectations for another ECB rate hike this year have declined significantly.

The Price

• EUR/USD rose around 0.1% to $1.1388, from an opening level of $1.1377, after touching an intraday low of $1.1372.

• The euro ended Wednesday down 0.4% against the dollar, marking its second consecutive daily loss, pressured by Lagarde’s remarks and weaker European inflation figures.

US dollar

The US Dollar Index fell 0.1% on Thursday and is heading for its first decline in three sessions, reflecting a moderation in the US currency against a basket of major global peers.

Federal Reserve Chair Kevin Warsh said on Wednesday that inflation expectations and price risks have eased in recent weeks, while reaffirming his strong commitment to the central bank’s 2% inflation target.

The US private sector added fewer jobs than expected in June, while manufacturing activity slowed more sharply than anticipated according to the latest Institute for Supply Management survey.

Those comments and economic releases reduced expectations that the Federal Reserve will raise interest rates at least once more this year. Investors now await the June US employment report later on Thursday, which is being released a day earlier than usual because of Friday’s Independence Day holiday in the United States.

According to the CME FedWatch Tool, the probability of the Federal Reserve keeping interest rates unchanged at its July meeting increased from 66% to 71%, while the probability of a 25-basis-point rate hike declined from 34% to 29%.

Markets are also pricing a 15% probability that rates remain unchanged by December, compared with an 85% probability of a 25-basis-point increase by year-end.

Global oil prices

Oil prices fell around 0.5% on Thursday, extending losses for a third consecutive session and hitting their lowest levels in five months as tensions in the Strait of Hormuz continued to ease, allowing more supertankers to move through the vital shipping route.

Lower oil prices help reduce inflation concerns and support expectations that major central banks could keep monetary policy settings unchanged for an extended period this year.

Christine Lagarde

Speaking on Wednesday in Sintra, Portugal, ECB President Christine Lagarde said risks surrounding inflation and economic growth in the eurozone have become more balanced compared with a few weeks ago, largely due to the recent decline in oil prices.

Eurozone inflation

Data released on Wednesday showed headline eurozone consumer prices rose 2.8% year-on-year in June, below market expectations of a 3.0% increase and down from 3.2% in May.

Core consumer prices rose 2.4% annually in June, also below expectations of 2.5%, compared with 2.6% in the previous month.

European interest rates

• Following Lagarde’s comments and the inflation data, money markets sharply reduced expectations for a 25-basis-point ECB rate hike in July, with pricing falling from 30% to just 5%.

• Investors now await additional eurozone data on inflation, unemployment, and wage growth to reassess the outlook for ECB policy.

• Reports suggest the ECB is considering pausing its policy normalization process in July if energy prices remain near current levels.

The Japanese yen edged higher in Asian trading on Thursday against a basket of major and minor currencies, attempting to recover from its lowest level in 40 years against the US dollar and heading toward its first gain in four sessions, supported by limited buying interest at depressed levels.

The US currency is facing downward pressure as oil prices slide to their lowest levels in five months, reinforcing expectations that inflationary pressures on the Federal Reserve may ease and reducing the likelihood of further US interest rate hikes this year.

The yen’s proximity to its weakest level since 1986 has intensified speculation that Japanese authorities could intervene in the foreign exchange market to support the local currency, with traders increasingly viewing Friday’s US market holiday as a potential window for action.

The Price

• USD/JPY fell by less than 0.1% to ¥162.48, from an opening level of ¥162.57, after touching an intraday high of ¥162.60.

• The yen ended Wednesday down by less than 0.1% against the dollar, marking its third consecutive daily loss and hitting a fresh 40-year low of ¥162.84 amid concerns over the widening yield gap between US Treasury bonds and Japanese government bonds.

US dollar

The US Dollar Index fell 0.1% on Thursday and is on track for its first loss in three sessions, reflecting a modest pullback in the greenback against a basket of global currencies.

Federal Reserve Chair Kevin Warsh said on Wednesday that inflation expectations and price risks have eased in recent weeks, while reaffirming his strong commitment to the Fed’s 2% inflation target.

The US private sector added fewer jobs than expected in June, while manufacturing activity slowed more than anticipated according to the latest Institute for Supply Management survey.

Those comments and economic reports have reduced expectations for at least one Federal Reserve rate hike this year. Investors now await the June US employment report later on Thursday, released 24 hours earlier than usual due to the Independence Day holiday on Friday.

According to the CME FedWatch Tool, the probability of the Federal Reserve leaving interest rates unchanged at its July meeting rose from 66% to 71%, while the probability of a 25-basis-point rate hike declined from 34% to 29%.

Markets are also pricing a 15% probability of no change by December and an 85% probability of a 25-basis-point rate increase by year-end.

Global oil prices

Oil prices fell around 0.5% on Thursday, extending losses for a third consecutive session and reaching their lowest levels in five months as tensions in the Strait of Hormuz continued to ease, allowing more supertankers to pass through the vital shipping route.

Lower oil prices are expected to reduce inflation concerns, supporting the case for major central banks to keep monetary policy settings unchanged for an extended period this year.

Japanese authorities

Japanese Finance Minister Satsuki Katayama said the government stands ready to take appropriate action against excessive exchange-rate volatility, adding that decisive measures remain on the table in line with agreements reached between Japan and the United States.

The yen’s decline to a 40-year low has revived speculation that Japanese authorities could return to the market after spending a record ¥11.7 trillion ($73.5 billion) in April and May to defend the currency against excessive moves.

Analysis and comments

• Kristy Tan, Global Market Strategist at Franklin Templeton Institute, said intervention could slow the pace of the currency’s decline, curb excessive speculation, and send a signal that authorities are uncomfortable with current market conditions, but it cannot change the broader trend.

• Tan added that as long as investors can borrow cheaply in yen and earn higher returns through dollar-denominated assets, carry trades will continue to weigh on the Japanese currency.

• Traders see Friday’s US holiday as a favorable opportunity for the Bank of Japan to buy yen, as thinner liquidity could magnify the impact of any intervention while reducing its cost.

• Matt Simpson, Senior Market Analyst at StoneX, said Japan’s Ministry of Finance would intervene if it could, but understands that it is currently swimming against the tide of a hawkish Federal Reserve.

• Simpson added that if US data delivers a surprise in favor of monetary easing advocates, Japanese authorities may intervene more aggressively by taking advantage of a weaker dollar. Until then, the market is likely to view official warnings as little more than rhetoric.

Japanese interest rates

• Market pricing for a 25-basis-point rate hike by the Bank of Japan at its July meeting remains below 25%.

• Investors are awaiting additional data on inflation, unemployment, and wage growth in Japan to reassess those expectations.

Gold prices edged into positive territory on Wednesday after recovering from earlier losses, following the precious metal’s worst quarterly performance in 13 years during the three months ended June.

The yellow metal started the second half of 2026 under pressure before regaining some ground in afternoon trading. Gold futures were last trading slightly above flat at $4,041.30 an ounce, while spot gold rose 0.49% to $4,025.89 an ounce.

After reaching a record high of $5,586.20 on January 29, gold has retreated sharply as investors adopted a more cautious view toward the non-yielding asset amid expectations that interest rates could remain elevated for longer.

Gold lost nearly 16% during the three months ended June 30, marking its worst quarterly performance since the second quarter of 2013. The metal is also down 7.76% year-to-date.

Strong US economy and dollar weigh on gold

Giovanni Staunovo, commodity analyst at UBS, said gold’s traditional safe-haven appeal has recently come under pressure from stronger-than-expected US economic data, rising real yields, a stronger US dollar, and changing market expectations toward a less accommodative Federal Reserve policy outlook.

“The recent price action reflects the sharp rally followed by a consolidation phase that we have seen during previous geopolitical crises,” Staunovo told CNBC via email. “However, gold entered this period with already elevated valuations and supportive expectations for Federal Reserve policy, making it more sensitive to macroeconomic factors at this stage.”

Despite the decline, gold continues to play an important role in investor portfolios, particularly as traditional correlations between asset classes become less reliable, according to the Amundi Investment Institute.

Central bank demand expected to remain supportive

In its semi-annual global investment outlook, the Amundi Investment Institute said a more challenging monetary environment, rising public debt levels, and central banks’ efforts to diversify reserves away from dollar-denominated assets should continue supporting demand for gold and other precious metals during the second half of the year.

Monica Defend, Head of the Amundi Investment Institute, said: “Investors are facing a world where central bank independence is being tested, inflation is becoming more volatile, and concentration risks are increasing.”

She added: “The best portfolios in this new environment must be able to withstand different scenarios. They need diversification across currencies, exposure to real assets and gold, and disciplined participation in equity sectors and long-term structural themes.”

The latest annual survey by the World Gold Council on central bank gold reserves showed that a growing number of central banks worldwide plan to increase their gold holdings over the next year.

“We believe central bank demand for gold, continued diversification away from the US dollar, and concerns about global debt levels will remain important structural support factors,” Staunovo said.

“While the short-term environment appears to be moving into a consolidation phase, investor positioning does not look excessively crowded, and we remain constructive on gold over the next 12 months.”

As Washington and Tehran remain divided over whether international inspectors can verify Iran’s compliance with its nuclear non-proliferation commitments, former officials say the scale, scope, and level of site access will be critical to the success of any future monitoring process.

The details of those arrangements have not yet been defined, although Rafael Grossi, Director General of the International Atomic Energy Agency, said the UN watchdog would work to determine the “when, how, and where” of inspections very soon.

But experts say that does not mean the agency has not already prepared a list of priorities for any potential future inspections.

Laura Rockwood, a former IAEA negotiator on Iran’s nuclear file, told Radio Free Europe/Radio Liberty: “They almost certainly have a plan for what they will do when they go back, what the priorities are, and where they want to go first, second, and third.”

Rockwood, who took part in high-level negotiations on Iran during a 28-year career at the IAEA before retiring in 2013, added: “The key thing is finding out exactly where the enriched uranium is. I would be willing to bet they have a plan ready for the day they need to return.”

Uranium downblending could open new disputes

While US President Donald Trump has said Iran agreed to the highest level of nuclear inspections, Tehran insists it does not plan to allow such inspections.

Article 8 of the US-Iran memorandum of understanding states that both sides agreed to a “minimum methodology” under which Iran’s stockpile of highly enriched uranium would be “downblended on site under IAEA supervision.”

But the details of how this step would be carried out could themselves become a source of disagreement.

Matthew Sharp, who served as director for Iran nuclear issues at the US National Security Council from 2021 to 2022, told Radio Free Europe/Radio Liberty: “If IAEA inspectors are able to measure and characterize both the highly enriched and low-enriched material before downblending, then simple calculations will provide a good understanding of the final product. They would then want to take measurements to verify the product and seal it for future accounting.”

Sharp, now a senior fellow for nuclear affairs at the Center for International Studies at MIT, added: “But if Iran carries out the downblending process itself and then presents the product to inspectors, it would be extremely difficult to know how much highly enriched uranium Iran started with. That could create uncertainty over whether all of the 60%-enriched uranium or other enriched material was actually downblended, or whether some of it remained outside our knowledge.”

For now, the location of roughly 450 kilograms of Iran’s highly enriched uranium remains unclear. Following US and Israeli airstrikes, the stockpile may be buried under rubble inside a fortified facility beneath a mountain, or Iranian authorities may have moved some or all of it elsewhere to conceal it.

But if the material can be successfully located and downblended, the next step would be preventing Iran from re-enriching it later.

Monitoring enrichment is the hardest test

The memorandum states that both sides agreed “to discuss the issue of enrichment and other agreed relevant issues related to the nuclear needs of the Islamic Republic of Iran, based on a satisfactory framework to be agreed in the final agreement.”

Experts told Radio Free Europe/Radio Liberty that verifying such a commitment would have to involve the IAEA.

Kelsey Davenport, Director for Nonproliferation Policy at the Arms Control Association, said: “Any suspension of uranium enrichment is relatively meaningless if it cannot be verified, and if the IAEA does not receive the access needed to ensure there are no covert enrichment-related nuclear activities taking place elsewhere in the country.”

She added: “The level of access, the provision of information to the IAEA, and how quickly Iran complies with agency requests for access will all be extremely important.”

Davenport said that once enrichment levels are reduced to below 5%, the material becomes safer to move abroad and could be stored in an international fuel bank in Kazakhstan.

The idea of removing downblended uranium from Iran appears to have attracted interest among US officials. During a recent background call with reporters, one official said dilution inside Iran represents “the minimum,” adding: “We will push for more than that.”

A senior US official said Washington would rely heavily on the IAEA and US technical teams to verify implementation. “We are not in the trust business,” the official said.

The IAEA has previously verified Iran’s compliance with its commitments under the Nuclear Non-Proliferation Treaty, which Tehran ratified in 1970, as well as under the 2015 Joint Comprehensive Plan of Action.

Lessons from the past will shape future monitoring

Experts say many lessons have been learned from previous experience, highlighting the importance of the IAEA’s Additional Protocol, which provides broader verification and monitoring tools.

Rockwood, now a senior fellow at the Vienna Center for Disarmament and Non-Proliferation and the principal author of the protocol, said: “Under the Additional Protocol, instead of routinely being limited to nuclear material and facilities, we gained access to information and sites related to the entire nuclear fuel cycle, including centrifuge production.”

She added: “If you know roughly how many centrifuges they can manufacture, then you want to know where they are, and we can request that kind of access under the Additional Protocol.”

Iran signed the Additional Protocol in 2003 but never sent the IAEA the formal letter required to bring it into force.

Tehran applied its provisions provisionally between 2003 and 2006, and again for a period during implementation of the JCPOA. But Rockwood noted that “there were many indications of Iranian non-compliance” during that time.

She said that situation may continue, with additional complications.

Iran has suspended IAEA access to sites that were struck by US and Israeli attacks on its nuclear facilities in June last year. That disrupted what Rockwood calls “continuity of knowledge,” meaning the agency lost the ability to track what Iran possesses and where those materials are located.

The scale of the damage also remains unclear, which could further complicate access to the sites, along with the possible presence of unexploded ordnance in some locations.

“There will be uncertainty, and there will probably be more uncertainty than there was before. In fact, I expect that to be the case,” Rockwood said. “Yes, it will be an extremely difficult task.”