Market Information Tuesday 8 July 2025

The Reserve Bank of Australia surprised markets by holding its policy rate steady at 3.85%, defying expectations of a rate cut, as it seeks further confirmation that inflation is sustainably trending toward its 2.5% target. Despite inflation cooling to 2.1% in May—its lowest level since October 2024—the central bank cited slightly stronger-than-expected data and a cautious outlook amid weakening consumer demand, falling exports, and slower public spending. The decision caused a modest dip in the S&P/ASX 200 and a rebound in the Australian dollar.

The Bank of Japan finds itself at a critical crossroads as it weighs the need to raise interest rates amid persistent inflation against the risk of a deepening slowdown of the economy. Real wages fell 2.9% in May—the sharpest drop in 20 months—despite record nominal wage hikes, highlighting how inflation is eroding household purchasing power. With the economy contracting in Q1 and U.S. tariff threats looming, the BOJ’s long-sought “virtuous cycle” of wage-led inflation is proving fragile. Analysts are split on the path forward: while some see rising prices as reason to hike rates and strengthen the yen, others argue the BOJ should hold steady to avoid further straining growth.

The euro is gaining global prominence as political and fiscal uncertainty in the U.S.—including rising tariffs, concerns over Federal Reserve independence, and a ballooning deficit—erode confidence in the dollar. Despite recent ECB rate cuts, the euro has surged 14% against the dollar in 2025, buoyed by expectations of EU fiscal expansion and investor demand for stable alternatives. Central bankers at the Aix-en-Provence forum emphasized that while the euro won’t dethrone the dollar overnight, it is increasingly viewed as a credible reserve currency, especially if the EU continues deepening financial integration and capital markets reform.

The 6M Euribor is unchanged at 2.03% compared to previous business day. The 10Y Swap increased with 2 basis points to 2.60% compared to previous business day.

In the attachment, today’s market data on money and capital market rates as well as other rates are presented.