A string of soft economic data, including higher jobless claims, weak private-sector hiring, and an unexpected contraction in services, has fueled concerns that President Trump’s tariff policies may be slowing growth. Although Trump has called for rate cuts, Fed officials remain cautious, emphasizing the need for more definitive data before adjusting policy.

In Japan, the 10-year government bond yield fell to around 1.45%, a near three-week low, following strong demand at a 30-year bond auction. Earlier in the week, solid demand for 10-year bonds also helped ease market pressure. The drop in yields comes after sharp gains in late May amid fiscal concerns and the BOJ’s ongoing tapering of bond purchases. Reports indicate the Finance Ministry may reduce super-long bond issuance, while BOJ Governor Ueda confirmed plans to continue cutting JGB purchases in the next fiscal year.

The European Central Bank cut interest rates by 25 basis points in June, citing revised inflation forecasts. Headline inflation is now expected to average 2.0% in 2025, dip to 1.6% in 2026, and return to 2.0% in 2027. Core inflation is projected to ease to 1.9% by 2026–2027. GDP growth is forecast to rise gradually from 0.9% in 2025 to 1.3% in 2027. Despite ongoing trade uncertainty, higher real incomes and increased public investment are expected to support the recovery. President Lagarde indicated the ECB may pause further easing, suggesting the rate cut cycle is nearing its end.

Initial jobless claims rose by 8,000 to 247,000 for the week ending May 31, the highest since October 2024 and above forecasts. Continuing claims edged down slightly to 1.904 million. Claims among federal employees declined by 72 to 538, amid heightened scrutiny following recent layoffs at the Department of Government Efficiency (DOGE), hinting at possible early signs of labor market strain.

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