The Davy Digest - 16th June 2025

Thursday’s auction of 30-year US Treasury bonds attracted notably robust demand, drawing a yield of 4.844%. This alleviated immediate concerns that investors might be reluctant to purchase the government’s longest-dated securities. This followed a similarly strong auction for 10-year Treasuries on Wednesday, which yielded 4.421%. US inflation increased by less than expected in May to 2.4% but is expected to rise in the coming months as a result of the Trump administration's import tariffs. The US Producer Price Index saw a slight uptick in the prices of goods sold by manufacturers, rising 0.1% month-on-month. US Consumer Sentiment for June saw the biggest jump since January 2024 to 60.5, as concerns about the economy and inflation ease. Elsewhere in Europe, German inflation eased to 2.1% in May, further towards its target. The UK unemployment rate rose to its highest level since July 2021, coming in at 4.6% in the three months to the end of April. China’s inflation rate fell by 0.1% year-on-year in May, the same as April’s reading.

Last week's highlights

	10-year & 30-year Treasury Auctions (11/06 & 12/06) – Robust demand. US Inflation (CPI) (11/06) – Rose less than expected to 2.4% in May. US Producer Price Inflation (12/06) – Rose by 0.1% month-on-month. Michigan Consumer Sentiment (13/06) – Jumped by the most since January 2024.
	Germany Inflation (HICP) (13/06) – Eased further to 2.1% in May.
	UK Unemployment Rate (10/06) – Rose to 4.6% in the three months to the end of April, the highest level since July 2021.
	China Inflation (CPI) (09/06) – Fell by 0.1% year-on-year, the same as previously.

This week, the Federal Reserve will meet on Wednesday to make a decision on its next interest rate move, as analysts expect the rate to remain unchanged this time. Monthly TIC data for April will be released which tracks the flow of portfolio capital into and out of the US. Investors in the Eurozone will receive data on inflation and on consumer confidence. The Bank of England will decide on Thursday whether to reduce borrowing costs after its quarter-point cut in May. Analysts expect the rate to be held steady at 4.25% after April’s increased inflation and attention will turn towards May’s inflation data which is out on Wednesday. The Bank of Japan and the People’s Bank of China will also meet next week to discuss changes to its benchmark rates. Although the Bank of Japan is expected to hold rates at current levels, investors are expected to closely monitor statements from Tokyo policymakers regarding the future direction of monetary policy, particularly due to the recent uptick in yields on 30- and 40-year Japanese government bonds.

What's on the radar

	Retail Sales (17/06) Fed Interest Rate Decision (18/06) TIC data (18/06)
	Eurozone Inflation (18/06) Eurozone Consumer Confidence (20/06)
	Consumer Price Index (18/06) BOE Interest Rate Decision (19/06) Retail Sales (20/06)
	China Industrial Production (16/06) BoJ Interest Rate Decision (17/06) PBoC Interest Rate Decision (20/06)

Chart of the moment

Does the buck stop with Trump?

Source: DataStream, Davy as of 12/06/2025. The chart shows the US Dollar index with red shading for cycles of dollar weakness and green shading for cycles of dollar strength. 

• The weakness of the US dollar in 2025 has received significant attention from financial markets and the media. Several factors have contributed to the dollar’s decline, including:
  • Fading US exceptionalism on growth
  • US policy uncertainty
  • Investment flows out of the US
  • US debt sustainability concerns
• This year’s dollar decline is not unprecedented, as shown by the chart. 
• Going forward, Davy maintains a cautious view on the US dollar.