Global FX Outlook for June: The US policy rollercoaster

From renewed trade tensions to bond market jitters, investors continue to navigate a volatile mix of geopolitical uncertainty and macroeconomic shifts. The United States remains central to this fragile sentiment, with unpredictable policy developments rattling markets and challenging expectations around currency movements.

Is your business prepared to weather this ongoing storm? Download our Global FX Outlook for June to uncover the key forces shaping currency markets, with a focus on rising fiscal concerns, evolving trade dynamics, and a market increasingly uncertain about the value of the US dollar.

US dollar momentum undermined by policy turbulence

The US dollar staged a brief comeback in April, recovering nearly 4% from a three-year low. A temporary reduction in US-China tariffs revived risk appetite and saw a rebound in global equities, but the optimism was short-lived. President Trump’s surprise threat of a 50% tariff on EU imports, later delayed to July, reignited fears of a trade war.

Meanwhile concerns around bond markets are growing. Moody’s downgrade of the US credit rating and mounting concerns about America’s fiscal outlook have pushed long-term treasury yields higher. This typically leads to a stronger currency, however US yields and the USD have decoupled over the past two months, offering further evidence of fading confidence in US assets.

Diverging fortunes: EUR, GBP, and AUD

The euro continues to move in tandem with US sentiment. Following a correction from three-year highs, EUR/USD climbed back above $1:13. Sterling, however, stood out from its G10 peers to hit its highest level against the dollar since 2022. The pound’s strength is underpinned by resilient UK economic data, improved trade relations, and the Bank of England’s hawkish stance.

The Australian dollar remains in a narrow trading range, cushioned by robust trade conditions and a stable Chinese yuan. Despite a dovish Reserve Bank of Australia, the AUD/USD is finding support between 0.63 and 0.65.

Key market themes

Tariffs a silver lining for the USA?

The US collected $48.1 billion in tariff revenues by late May; a 67% increase compared to last year. While this surge might look promising, it pales in comparison to the $2.4 trillion collected via federal income taxes in 2024. Tariffs may provide short-term revenue relief but are unlikely to comfortably offset the lost tax revenue. A clearer picture of the policy’s impact will take shape in the coming months.

Surging bond yields unwelcome

Bond markets appear to be in retreat globally, not just in the US. Yields on Japan’s 40-year bonds and the UK’s 30-year bonds are near multi-decade highs. The sharp rise in long-term yields is typically a sign of optimism but is now more reflective of fiscal concerns which are driving the dollar’s depreciation.

Resilience or data distortions?

Surprisingly positive economic data across most major economies (excluding Canada and Japan) has dampened recession fears. However, this data is likely distorted by a run of tariff front-loading boosting short-term activity and painting a misleading picture of economic strength.

Fiscal on the forefront

The global trade war remains a key theme to watch, with the renewed standoff between the US and EU emphasizing that tariff threats and delays can quickly re-emerge and ignite volatility.

Another significant theme in this month’s report is fiscal policy and US debt dynamics. The US deficit stood at 6% of GDP in 2024, but projections suggest it could approach 9% by 2035. A proposed tax cut bill was met with scepticism, and combined with Moody’s downgrade and rising borrowing costs, the outlook is increasingly challenging.  

This fiscal pressure is contributing to a broader structural shift. As the world diversifies away from dollar-denominated assets, the inverse relationship between US yields and the dollar becomes more pronounced. Higher yields are no longer translating into dollar strength and are instead highlighting that investors are reluctant to bet on US creditworthiness.

Watch a recap of the Global FX Outlook for June

Watch our Market Insights team give an overview of our Global FX Outlook for June, including the growing dislocation between traditional market drivers and current investor behavior.

Fiscal concerns, erratic policymaking, and trade tensions are reconfiguring expectations across currencies, bond markets and global trade flows. For companies managing cross-border payments and volatile currency markets, agility and insight have never been more critical. Now is the time to rethink assumptions and prepare your business to navigate this rapidly changing environment.

Download our Global FX outlook for June and leverage deep analysis, currency forecasts, and insights that can help you manage international trade with confidence.

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