PBOC Chief Charts Post-Dollar Future: Multipolar Currency Order on the Horizon

Economic

Forex

Summary:

PBOC Governor Pan Gongsheng has outlined his boldest vision yet for a new global currency order that breaks the US dollar's dominance. Speaking at the Lujiazui Forum in Shanghai...

A Shifting Global Currency Landscape

Pan Gongsheng’s keynote speech comes at a time when global faith in the US dollar is under renewed pressure. With President Trump’s second term marked by volatile trade and economic policies, the dollar has depreciated sharply—dropping over 10% against the euro, pound, and Swiss franc. Investors, central banks, and multinationals are increasingly seeking alternatives. Pan seized this moment to reinforce China’s strategic currency vision: a diversified, multipolar world where no single currency holds unchallenged sway.

Pan emphasized that such a system—where sovereign currencies “co-exist, compete, and check and balance each other”—would reduce risks tied to overreliance on a single global currency. He echoed sentiment previously expressed by ECB President Christine Lagarde and cited growing discussions worldwide about diversifying currency exposure, especially among US trade partners seeking protection from dollar volatility.

Yuan’s Expanding Role and China’s Monetary Strategy

Pan confirmed that the yuan’s international use is rising, especially as US-China tensions prompt exporters and financial institutions to explore non-dollar settlements. The People’s Bank of China (PBOC) has shifted from supporting the yuan’s value to preventing excessive appreciation. After hitting its weakest level since 2007 in April, the yuan rebounded over 1% this quarter, reflecting shifting capital flows and changing investor sentiment.

To boost the yuan’s global appeal, Pan announced new initiatives in Shanghai to support financial liberalization. These include the creation of a yuan digital operations center, promotion of yuan-denominated offshore bonds, and development of yuan futures trading platforms. These moves aim to deepen liquidity, encourage cross-border use, and reinforce Shanghai’s role as a global financial hub.

Calls for IMF Reform and Super-Sovereign Currency Revival

Pan’s vision also includes a greater role for the IMF’s special drawing rights (SDRs)—an idea earlier championed by former PBOC Governor Zhou Xiaochuan. SDRs, a basket-based reserve asset created by the IMF, could evolve into a “super-sovereign currency”, mitigating the risks of sovereign-currency dominance and improving global financial stability.

However, Pan acknowledged that a lack of consensus and insufficient issuance of SDRs hinder their wider adoption. He called for regular, larger SDR allocations and urgent reform of the IMF’s quota system to reflect the rising influence of emerging markets. Currently, IMF governance continues to tilt toward advanced economies, which Pan and others argue is outdated given the global economic rebalancing.

Geopolitical and Economic Undercurrents

China’s ambition to reshape the global currency landscape has intensified amid escalating tariff risks, weakening dollar hegemony, and a broader shift in trade and investment flows. Some US exporters are already using alternative currencies like the yuan to hedge against dollar instability. These adjustments underscore a deepening trend toward currency regionalization and multi-currency transaction systems.

Pan further noted that the global cross-border payments system is becoming more diverse, as countries increasingly promote settlement in their own currencies. This trend—combined with digital currency innovation, central bank cooperation, and regional blocs—suggests the traditional dollar-centric framework is under structural pressure.

No Major Stimulus, but Continued Monetary Easing

Despite expectations, Pan refrained from announcing new stimulus measures during the forum. Unlike 2024—when the PBOC introduced a significant policy reform—this year’s approach was more reserved. Still, the PBOC recently cut interest rates and the reserve requirement ratio in May to support liquidity. Interbank borrowing costs fell to their lowest level this year, indicating short-term easing remains in play.

Meanwhile, benchmark bond yields have stabilized after previous deflation fears, aided by reduced trade tensions and halted central bank bond purchases.

Governor Pan’s vision of a post-dollar global order is no longer a fringe argument—it’s a reflection of evolving geopolitical realities and economic pragmatism. As China mobilizes to elevate the yuan’s status and works in tandem with institutions like the IMF, the world may indeed shift toward a competitive and more resilient multipolar currency regime. The speed and success of this transformation, however, will depend on both structural reforms at home and sustained multilateral engagement abroad.

Source: Bloomberg

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Daniel Carter

Economic

Political

Key Points:

● Main event: Germany and the US near a trade deal.

● Potential easing of tariffs noted by sources.

● No direct impact on crypto assets currently noted.

Germany-US Trade Agreement Progress

Chancellor Merz's statement on the forthcoming trade agreement underscores its potential significance in resolving existing tariff issues, potentially boosting trade activity between Germany and the US.

Germany, represented by Chancellor Friedrich Merz, anticipates the completion of a trade agreement with the United States by summer. The agreement seeks to ease tariff-related tensions, taking cues from a recent US–UK trade model. Merz emphasized the importance of "small steps" towards the deal's fruition in his remarks at the G7 summit. "We are approaching agreement in small steps. I assume that this agreement will be possible before the summer, before the summer break, and that we will then also be able to reach a similar agreement to the one concluded between the United States of America and the United Kingdom," said Friedrich Merz.

The pending trade deal, primarily involving tariff reductions, might positively affect both German and American businesses by easing financial constraints. Although the specifics on funding and institutional involvement remain undisclosed, the implications for trade flows are significant.

As credit to Merz's efforts, this aligns with his pro-business ideology and diplomatic drive. The trade dynamics, however, are detached from immediate impacts on the crypto market, including major digital assets like Bitcoin or Ethereum, within available data.

Statements from key opinion leaders in the crypto space, regulatory bodies, and the development community remain absent as of this assessment, with on-chain data unaffected. The anticipated agreement, while economically consequential, is largely detached from immediate crypto market movements.

Source: CryptoSlate

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Economic

Middle East Situation

Geopolitical Escalation Sparks Global Market Turbulence

On Wednesday, global markets responded uneasily to the rapidly intensifying conflict in the Middle East. President Donald Trump’s abrupt departure from the G7 summit and stark warning to Iranian civilians, followed by threats of further escalation, unsettled financial markets and drove oil prices up more than 4% on Tuesday. Iran’s strategic location near the Strait of Hormuz—a chokepoint for global oil flows—intensified fears of potential supply disruptions.

Crude oil benchmarks continued to climb Wednesday morning. U.S. benchmark WTI crude rose to $73.51 per barrel, while Brent crude edged higher to $76.71. The sharp uptick in oil prices adds inflationary pressure at a time when the Federal Reserve remains cautious about interest rate cuts, despite recent weak economic indicators.

Asian Markets Mixed Amid Energy Volatility and Trade Friction

Markets across Asia delivered a fragmented response. Japan’s Nikkei 225 rose by 0.7%, shrugging off a troubling export report that showed a 1.7% annual drop in total exports, including an 11.1% plunge in shipments to the U.S. due to Trump’s tariffs. Japanese auto exports, in particular, were hit hard. Nonetheless, investors in Tokyo appeared to price in hopes of fiscal support or currency-driven competitiveness.

In contrast, Hong Kong’s Hang Seng fell 1.2%, weighed down by geopolitical concerns and spillover from mainland China's consumer subsidy uncertainty. The Shanghai Composite Index dipped 0.2%, reflecting caution amid China’s delayed rollout of trade-in subsidies and uneven consumption recovery.

Elsewhere, South Korea’s Kospi gained 0.6%, supported by tech resilience, while Australia’s ASX 200 edged down 0.2%, reflecting weakness in energy-sensitive sectors and mining-related equities.

Wall Street Drops as Recession Fears Resurface

U.S. equities tumbled as surging oil prices and disappointing retail sales data reignited concerns of a demand-side slowdown. Retail sales dropped 0.9% in May, missing economists’ expectations and highlighting reduced consumer momentum. This marked a shift from April’s temporarily strong performance, where consumers had front-loaded purchases—especially cars—before tariffs took effect.

The S&P 500 fell 0.8%, the Dow dropped nearly 300 points (0.7%), and the Nasdaq declined 0.9%, with solar energy stocks leading the losses amid Congressional debate on phasing out green energy tax credits. Enphase Energy plunged 24%, and First Solar lost nearly 18% despite oil price tailwinds that would normally favor renewable alternatives.

Bond markets saw a flight to safety as yields fell. The 10-year Treasury yield dropped by more than 6 basis points, reflecting market pessimism about growth and inflation. Currency markets responded modestly; the U.S. dollar weakened slightly to 145.09 yen, while the euro rose to $1.1498, mirroring cautious risk sentiment and softer dollar outlook.

Investor Focus Turns to the Federal Reserve

The Fed began its two-day meeting Tuesday, with no immediate rate change expected. However, markets remain sensitive to any shifts in tone regarding rate cuts later this year, especially in the context of Trump’s tariffs, slowing retail activity, and geopolitical risks.

Although inflation remains relatively tame, near the Fed’s 2% target, policymakers remain reluctant to ease prematurely. According to current forecasts, a potential rate cut in September is still on the table—pending clearer evidence of a downturn.

The global investment landscape is being reshaped by war-risk premiums in energy markets and a fragile macroeconomic backdrop. Asian markets remain divided between growth hopes and external risks, while U.S. markets reflect rising anxiety over inflationary oil shocks and stalling consumption. With Federal Reserve signals, oil trends, and geopolitical risks all converging, investors face a turbulent and unpredictable summer ahead.

Source: AP

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Economic

A Global Rotation into Asia’s Debt Markets

In a marked shift in global capital flows, investors are increasingly moving away from developed market bonds toward Asian fixed-income instruments. Malaysia has emerged as the top destination, receiving its largest monthly bond inflow since 2014—$3.15 billion in May—amid a broader regional surge that saw Asian markets attract $34 billion in foreign inflows in the first five months of 2025, the highest since at least 2016.

The broader appeal of Asia lies in its convergence of favorable monetary conditions: policy rates at or near their peak, benign inflation, and relatively strong currency performance—all of which contrast with fiscal uncertainty and elevated inflation in the U.S., Europe, and Japan. Investors are positioning for rate cuts, locking in yields at current high levels, and anticipating capital gains as bond prices rise when yields eventually decline.

Malaysia’s Edge in the Regional Landscape

Malaysia stands out for three reasons. First, it has not yet initiated a rate-cut cycle, unlike many of its peers, leaving room for bond prices to rise when the easing begins. Second, the ringgit has remained resilient amid global currency volatility. Third, relative political stability and a well-functioning bond market make it more attractive compared to neighbors like Indonesia and Thailand, where either high valuations or policy limitations are concerns.

While Thailand saw outflows of $53.6 million in May due to limited rate-cut capacity and already compressed bond yields, Malaysian bonds are viewed as undervalued with significant upside if, as some anticipate, a rate cut materializes in July. This divergence in expectations creates opportunities for yield hunters.

Indonesia, though offering a 200 basis point premium over U.S. Treasuries on its 10-year bonds, suffers from lingering concerns about fiscal discipline and political uncertainty. Meanwhile, India is gaining attention due to a consistent easing path and strong demand from both retail and institutional investors.

A Weaker Dollar and U.S. Policy Risks

The appeal of Asian debt is being further fueled by broader macroeconomic forces. U.S. President Donald Trump’s unpredictable trade and fiscal policies have shaken investor confidence, while the weakening dollar enhances the appeal of emerging market currencies. U.S. retail sales fell sharply in May, reigniting recession concerns and pushing Treasury yields lower.

With markets anticipating U.S. Federal Reserve rate cuts later this year, capital has started flowing toward emerging markets that offer more favorable risk-adjusted returns, particularly where bond yields are peaking and inflation remains subdued.

Liquidity Challenges and Long-Term Implications

Despite the current optimism, structural issues in Asian bond markets remain. Liquidity is often shallow, and sudden inflows can create volatility—as seen in Hong Kong last month, when a surge in capital caused disruptions in currency stability. However, analysts like Claudio Piron of Bank of America suggest that, after five years of minimal portfolio inflows, the return of capital to Asia is not only welcome but also sustainable—provided it occurs in a “calibrated, natural way.”

The record inflows into Asian bond markets—led by Malaysia—mark a significant realignment in global investment strategies. While macroeconomic uncertainties and liquidity limitations persist, Asia’s favorable monetary landscape, supported by political stability and strengthening currencies, is drawing in investors who are increasingly wary of the volatility and low returns in developed markets.

Whether this marks a structural pivot or a tactical rotation remains to be seen, but for now, Asia—particularly Malaysia—is enjoying a rare moment at the forefront of global bond demand.

Source: Reuters

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Beijing Stresses Controlled Rollout of Consumer Stimulus

In an effort to maintain economic stability while sustaining momentum in domestic consumption, China’s central government will issue the remainder of its trade-in consumer goods subsidies in a measured pace, according to a report by state media outlet Securities Times on Wednesday. The announcement follows reports of regional strain on subsidy programs due to unexpectedly high demand, particularly in the automotive sector.

Out of the 300 billion yuan (approximately $41.8 billion) earmarked for this national stimulus initiative, 162 billion yuan ($22.54 billion) has already been allocated to local governments. The central government is now providing oversight to ensure the remaining disbursements proceed at a sustainable rate and avoid regional fund depletion or mismanagement.

Subsidy Program Boosts Consumption but Faces Operational Bottlenecks

The consumer goods trade-in initiative—aimed at encouraging households to replace old appliances, electronics, and vehicles—has been a core pillar of Beijing’s strategy to reinvigorate consumption in a slowing economy. The program contributed to a sharp rebound in retail sales last month, helping to offset weaker industrial output and soft investment.

However, rapid uptake in major cities has tested the administrative capacity of local governments. At least six cities, including several in key manufacturing provinces, have temporarily suspended vehicle trade-in subsidies due to budget constraints and possible misuse of the system. These suspensions reflect the challenge of scaling short-term stimulus in a country of China’s size, especially when demand outpaces funding allocations.

Balancing Short-Term Growth with Fiscal Discipline

The central government’s decision to manage subsidy distribution more cautiously suggests an attempt to balance two competing objectives: sustaining short-term consumption recovery and preserving long-term fiscal health. With public finances under pressure from falling land sales and slower tax revenues, policymakers appear wary of allowing local deficits to grow unchecked.

This cautious approach also seeks to reduce the risk of arbitrage and fraud—issues that have emerged in some cities where car dealers exploited the system by registering vehicles for resale to claim rebates without actual end-user transactions.

China’s gradual approach to issuing the remaining consumer subsidy funds signals a shift toward tighter fiscal discipline while still prioritizing consumption recovery. As local governments face logistical and financial challenges, Beijing’s controlled rollout aims to preserve momentum without compromising the program’s credibility or sustainability. In the coming months, the success of this balancing act will be crucial in determining whether the current rebound in household spending can be sustained into the second half of 2025.

Source: Reuters

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Forex

UK Inflation Eases, but Oil Shock Clouds Rate Cut Bets

Softer-than-expected UK inflation data fueled speculation about Bank of England rate cut bets on Wednesday, June 18.

The UK’s annual inflation rate (headline) cooled from 3.5% in April to 3.4% in May, aligned with a consensus of 3.4%. Core inflation dropped from 3.8% to 3.5% in May, below a consensus of 3.6%.

Key price trends from the Office for National Statistics included:

The Consumer Prices Index, including owner-occupier housing costs (CPIH), rose 4.0% in the 12 months to May after rising 4.1% in April.
The largest downward contribution came from transport, offsetting upward contributions from food, and furniture and household goods.
The Core CPIH (excluding energy, food, alcohol, and tobacco) increased by 4.2% in the 12 months to May, compared with 4.5% in April.
Core CPI (excluding energy, food, alcohol, and tobacco) eased from 3.8% in the 12 months to April to 3.5% in the 12 months to May.
The CPI services annual rate slowed from 5.4% in April to 4.7% in May.

Despite the softer inflation readings, a spike in WTI crude oil prices in response to the Iran-Israel conflict may cloud the inflation outlook. Uncertainty about CPI trends may leave the BoE in a policy-holding pattern despite a faltering UK economy.

BoE to Hold Rates in June

Economists expect the BoE to keep interest rates at 4.25% on Thursday, June 19, despite the UK economy losing momentum in April. The UK GDP fell 0.3% month-on-month as services output dropped for the first time since October 2024.

However, sticky inflation and potentially higher oil prices could raise stagflation risks. Monetary policy uncertainty and a worsening economic outlook may pressure GBP/USD.

Ahead of May’s inflation report, ING Economics commented on the BoE’s potential rate path, stating:

“We expect the Bank of England to keep rates at 4.25% on 19 June, but some disappointing job numbers, lower wage growth, and a more optimistic outlook for services inflation mean we expect cuts in August and November.”

May’s services inflation numbers supported ING Economics’ outlook. However, the Iran-Israel conflict remains a curveball for economists and central bankers.

Friday’s upcoming retail sales figures could give a better gauge of momentum in the UK economy and the BoE’s path forward.

GBP/USD Volatility Post-Inflation Data

Ahead of the inflation report, the GBP/USD dipped to a low of $1.34145 before climbing to a high of $1.34489. Following the report, the pair fell to a low of $1.34403 before surging to a high of $1.34621.

On Wednesday, June 18, the GBP/USD was up 0.19% to $1.34530. The upswing likely signaled the potential impact of sticky inflation on the BoE’s policy outlook.

GBPUSD – 3 Minute Chart – 180625

Looking Ahead

Traders must now turn to the BoE’s interest rate decision on June 19 and Friday’s UK retail sales. Consumer spending data may offer further insights into consumer sentiment and potential GDP and inflation trends.

A drop in retail sales could signal further economic weakness and softer inflation, supporting multiple BoE rate cuts. However, strong retail sales could dampen BoE rate cut bets, sending GBP/USD higher.

In parallel, trade developments and the Iran-Israel conflict will remain key drivers of risk sentiment and GBP/USD price action.

Source: FX Empire

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U.S. Tariffs Deal a Heavy Blow to Japan’s Export Sector

Japan, the world’s fourth-largest economy, is showing growing signs of strain as its export-driven growth model faces intensified pressure from new U.S. trade barriers. According to data released by Japan’s Ministry of Finance on June 18, total exports in May fell by 1.7% year-over-year, marking the first contraction in eight months. This decline was driven primarily by an 11.1% plunge in exports to the United States, Japan’s largest export market.

The impact of trade policy shifts under President Donald Trump is becoming increasingly visible. Since April 5, Japanese exports to the U.S. have been subject to a 10% general tariff, with an additional 14% retaliatory duty set to take effect on July 9 unless a deal is reached. Moreover, a separate 25% levy already applies to steel, automobiles, and auto parts. Earlier this month, Trump’s administration escalated tensions further by doubling tariffs on imported steel and aluminum to 50%.

Auto and Steel Exports Lead Declines

The latest data reveals sector-specific damage: exports of complete automobiles to the U.S. in May plummeted 24.7%, while auto parts fell by 19%, and steel shipments dipped by 1.5%. These declines point to targeted vulnerabilities in Japan’s industrial economy, particularly in industries most exposed to U.S. protectionism.

With automotive exports making up nearly one-third of Japan’s U.S.-bound shipments, the sharp contraction in this category signals not only immediate pain but longer-term structural risks, especially as electric vehicle adoption and regional trade realignments threaten traditional Japanese export advantages.

Diplomatic Stalemate After Six Rounds of Negotiations

Despite six rounds of high-level trade talks between Japanese and American officials, progress has stalled. Prime Minister Shigeru Ishiba met President Trump on June 16 during the G7 summit in Alberta, but discussions failed to yield a breakthrough. Trump has reportedly accused Japan of being "tough" in negotiations, further dampening optimism for a near-term resolution.

This prolonged impasse comes at a time when Japan is urgently seeking relief for its embattled exporters. With the July 9 tariff hike deadline approaching, companies face growing uncertainty about market access, pricing power, and long-term competitiveness in the U.S. market.

Asia’s Broader Trade Landscape Also Struggles

Japan is not alone in feeling the effects of U.S. trade policy. South Korea’s exports have also fallen for the first time in four months, and China’s trade with the U.S. has declined by double-digit percentages for two consecutive months. These regional signals suggest that the fallout from U.S. tariff actions is not isolated but systemic, rippling across Asia’s tightly interlinked supply chains.

Within Japan’s broader trade performance, results were mixed. While exports to China fell 8.8%—marking the third straight monthly decline—exports to the European Union rose by 4.9%. Shipments to Southeast Asia edged up by a marginal 0.1%, indicating stagnation in a traditionally high-growth corridor.

Imports Fall, Trade Surplus Widens—But Not for the Right Reasons

On the import side, Japan recorded a 7.7% decline year-over-year, sharper than expected. While this helped produce a trade surplus of 637.61 billion yen (approximately $4.4 billion), the contraction in imports may reflect weakening domestic demand rather than a healthy rebalancing of trade. With household consumption and industrial investment both under pressure, Japan’s trade surplus could signal economic fragility rather than strength.

Japan’s export-driven economy is facing a pivotal moment. The sharp drop in shipments to the U.S.—its top trading partner—comes amid a breakdown in diplomacy and escalating tariff pressures. As global supply chains remain fragile and geopolitical tensions intensify, Japan must grapple with both external headwinds and internal structural challenges.

Without a swift resolution to its trade standoff with Washington, Tokyo risks deeper industrial contraction and a prolonged drag on GDP growth. The coming weeks may prove critical not just for Japan’s economic outlook, but for the broader stability of trade flows in the Asia-Pacific region.