The euro remained under pressure against a basket of major currencies during European trading on Wednesday, extending losses for a second consecutive session against the US dollar as the greenback continued to benefit from rising US Treasury yields ahead of a closely watched speech by Federal Reserve Chair Kevin Warsh.

Investors are also awaiting key eurozone inflation data later today, along with remarks from European Central Bank President Christine Lagarde at the ECB’s annual Sintra Forum in Portugal, as markets look for fresh clues on the outlook for European interest rates.

The Price

• The euro fell around 0.2% against the US dollar to $1.1402, down from an opening level of $1.1421. The session high was recorded at $1.1423.

• The single currency closed Tuesday down less than 0.1% against the dollar, marking its first daily decline in four sessions, pressured by rising yields on US 10-year Treasury notes.

US Dollar

The US Dollar Index gained 0.2% on Wednesday, extending its advance for a second straight session and reflecting continued strength in the greenback against a basket of global currencies.

The dollar has received support from the recent rise in long-term US Treasury yields, particularly after positive US labor market data reinforced expectations that the Federal Reserve could raise interest rates at least once more this year.

Global markets are now closely watching comments from Federal Reserve Chair Kevin Warsh later today at the European Central Bank Forum in Sintra, Portugal, for further guidance on the outlook for US monetary policy.

European interest rates

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

• Money markets continue to price roughly a 30% probability of a 25-basis-point ECB rate hike in July.

Eurozone inflation

To reassess expectations for additional ECB tightening this year, investors are awaiting the release of June inflation data for the eurozone later today.

The figures will provide an updated picture of inflationary pressures facing policymakers at the European Central Bank.

The eurozone annual Consumer Price Index is due at 09:00 GMT. Market forecasts point to annual inflation easing to 3.0% in June from 3.2% in May, while core inflation is expected to slow to 2.5% from 2.6% previously.

Christine Lagarde

At 13:00 GMT, ECB President Christine Lagarde is scheduled to deliver an important speech at the European Central Bank Forum on Central Banking in Sintra, Portugal.

Markets will be looking for additional insights into inflation trends across the eurozone and the ECB’s view on the future path of interest rates this year.

Outlook for the euro

At Economies.com, we believe that if inflation data comes in softer than expected and Christine Lagarde delivers less hawkish remarks, expectations for another ECB rate hike this year could weaken further, potentially leading to additional losses for the euro against a basket of global currencies.

The Japanese yen weakened against a basket of major and minor currencies during Asian trading on Wednesday, extending losses for a third consecutive session against the US dollar and falling to its lowest level since 1986, as concerns over the widening gap in long-term bond yields between Japan and the United States continued to weigh on the currency.

The yen’s slide to fresh four-decade lows has intensified speculation that Japanese authorities could step into the foreign exchange market to support the currency. Traders increasingly believe any intervention could take place during the upcoming US market holiday on Friday, when thinner liquidity conditions may amplify its impact.

The Price

• The US dollar rose 0.2% against the Japanese yen to ¥162.84, the highest level since December 1986, after opening at ¥162.52. The session low was recorded at ¥162.49.

• The yen closed Tuesday down 0.35% against the dollar, marking its second consecutive daily decline, pressured by rising yields on US 10-year Treasury notes.

• Over the course of June, the yen lost 2.1% against the US dollar, posting a second straight monthly decline as markets continued to react to the Federal Reserve’s hawkish outlook.

US Dollar

The US Dollar Index climbed 0.2% on Wednesday, holding onto gains for a second consecutive session and reflecting continued strength in the greenback against a basket of global currencies.

The dollar has been supported by the recent rise in long-term US Treasury yields, particularly after key labor market data reinforced expectations that the Federal Reserve could raise interest rates at least once more this year.

Markets are now closely watching comments later today from Federal Reserve Chair Kevin Warsh at the European Central Bank Forum in Sintra, Portugal, for further clues on the outlook for US monetary policy.

Japanese authorities

Japanese Finance Minister Satsuki Katayama reiterated that the government is prepared to take appropriate action against excessive currency volatility.

Katayama added that this includes decisive measures agreed upon between Japan and the United States.

Market views

• Chidu Narayanan, head of Asia-Pacific macro strategy at Wells Fargo, said another intervention remains a possibility: “We believe we are approaching a point where action becomes increasingly likely.”

• Narayanan added that current levels are critical, not necessarily because of a specific exchange rate target, but because authorities may need to intervene to maintain credibility.

• Traders view Friday’s US holiday as a potential opportunity for Japanese authorities to buy yen, as lower liquidity could magnify the impact of any intervention and reduce its overall cost.

• Matt Simpson, senior market analyst at StoneX, said Japan’s Ministry of Finance may want to intervene but faces a difficult challenge while fighting against a hawkish Federal Reserve backdrop.

• Simpson added that if upcoming US economic data unexpectedly weakens and boosts expectations for monetary easing, Japanese authorities could take advantage of a softer dollar environment to intervene more aggressively. Until then, intervention threats are likely to remain largely verbal.

Japanese interest rates

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

• Investors are awaiting additional data on inflation, wages, and unemployment in Japan to reassess the likelihood of further policy tightening.

Soybean and grain futures on the Chicago Board of Trade traded slightly higher on Tuesday as traders adjusted positions ahead of the US Department of Agriculture’s quarterly grain stocks report while continuing to monitor weather conditions across the US Midwest.

The most active soybean contract on the CBOT rose 0.04% to $11.39½ per bushel as of 08:28 GMT, while corn gained 0.37% to $4.11¾ per bushel.

Wheat futures also advanced 0.82% to $5.84¼ per bushel.

The USDA’s quarterly grain stocks report, due later in the day, is expected to provide fresh insight into supply prospects for the upcoming corn and soybean marketing season.

Analysts, on average, expect the USDA to lower its estimate for corn planting acreage while increasing its forecast for soybean acreage.

A wave of hot weather sweeping across large parts of the US Midwest this week is also expected to add stress to crops and support prices, although forecasts for rainfall later in the week and cooler temperatures could help limit potential damage.

Soybean and corn prices have faced pressure from declining crude oil prices because both crops are used in biofuel production, while wheat has been weighed down by the ongoing harvest in the US Plains and abundant global supplies.

In its weekly crop progress report released on Monday, the USDA rated 67% of the US corn crop and 65% of the soybean crop as being in “good-to-excellent” condition, each down one percentage point from the previous week and below market expectations.

Winter wheat ratings were unchanged at 26% good-to-excellent, while harvest progress lagged expectations, reaching 48% completion compared with forecasts of 54%.

Traders said commodity funds were net sellers of corn, soybean, and wheat futures on the Chicago Board of Trade on Monday.

Gold prices fell on Tuesday and remained on track for their steepest quarterly decline in 13 years, as persistent inflation concerns linked to the Middle East conflict reinforced expectations that the Federal Reserve could keep monetary policy tighter for longer.

Spot gold slipped 0.2% to $4,008.94 per ounce after touching its lowest level since November earlier in the session. Prices have fallen 11.3% since the start of June.

Meanwhile, August gold futures declined 0.4% to $4,022.70 per ounce.

The precious metal is on course for its first quarterly loss since 2024 and its largest quarterly decline since the second quarter of 2013.

Although gold is traditionally viewed as a hedge against inflation, higher interest rates tend to weigh on the non-yielding asset by increasing the appeal of interest-bearing investments.

“Markets are somewhat concerned about how stable the memorandum of understanding really is, and gold is under pressure because investors are not seeing much light at the end of the tunnel,” said Edward Meir, analyst at Marex.

Senior US envoys arrived in Doha, but a Qatari official said there would be no high-level meeting with Iran, raising doubts about progress toward a lasting end to the Iran conflict.

Higher-for-longer outlook

At the same time, US inflation remains stubbornly elevated and well above the Federal Reserve’s 2% target.

Meir said markets increasingly expect interest rates to remain higher for longer, with the possibility of additional tightening, a backdrop that continues to pressure gold prices.

Traders are currently pricing in roughly a 65% probability of a Federal Reserve rate hike in September, according to the CME FedWatch Tool.

Investors are now awaiting ADP private-sector employment data on Wednesday and the US nonfarm payrolls report on Thursday for further clues about the Fed’s policy path.

In a separate development, a survey conducted by the Official Monetary and Financial Institutions Forum showed that central banks are becoming more inclined to reduce their exposure to the US dollar over the next decade due to rising geopolitical concerns, while increasing their gold holdings in the near term.

Among other precious metals, spot silver fell 0.8% to $58.2585 per ounce and is heading for its worst quarterly performance since the first quarter of 2020.

Platinum declined 0.7% to $1,564.34 per ounce, while palladium edged up 0.2% to $1,215.94 per ounce.

Both platinum and palladium remain on track to post monthly and quarterly losses.