Ukraine's Zelenskiy to Seek G7 Support As Trump's Early Exit Puts Dampener on Summit

Political

Summary:

Ukrainian President Volodymyr Zelenskiy will on Tuesday urge the Group of Seven to provide more backing for the war against Russia even after U.S. President Donald Trump left the summit early due to developments in the Middle East.

Zelenskiy is due to meet Canadian Prime Minister Mark Carney in the morning before attending a G7 working breakfast on "A strong and sovereign Ukraine", accompanied by NATO Secretary-General Mark Rutte.

The Ukrainian embassy in Canada said Zelenskiy's travel plans had not changed.

Trump said on Monday he needed to be back in Washington as soon as possible due to the situation in the Middle East, where the escalating attacks between Iran and Israel have raised risks of a broader regional conflict.

"I'm very grateful for the President's presence and I fully understand why he must return," said Carney, who holds the rotating presidency of the G7.

A European Union diplomat said all other members wanted to stay to meet Zelenskiy and continue conversations.

The G7 has struggled to find unity over conflicts in Ukraine and the Middle East as Trump overtly expressed support for Russian President Vladimir Putin and has imposed tariffs on many of the allies present.

Trump did agree to a group statement calling for de-escalation of the Israel-Iran conflict.

"We urge that the resolution of the Iranian crisis leads to a broader de-escalation of hostilities in the Middle East, including a ceasefire in Gaza," the statement said.

The statement said Iran is the principal source of regional instability and terror and that Israel has the right to defend itself.

Last week Zelenskiy said he planned to discuss continued support for Ukraine, sanctions against Russia, and future financing for Kyiv's reconstruction efforts.

Trump said on Monday the then Group of Eight had been wrong to expel Russia after Putin ordered the occupation of Crimea in 2014.

Though the U.S. president stopped short of saying Russia should be reinstated in the group, his comments had already raised doubts about how much Zelenskiy could achieve in a scheduled Trump meeting.

Trump and British Prime Minister Keir Starmer said they had finalized a trade deal reached last month while Carney said he and the U.S. president had agreed to seal a new economic and trade relationship inside the next 30 days.

But the news was not as good for Japanese Prime Minister Ishiba Shigeru, who had been hoping to seal an agreement of his own on Monday. He told reporters he had had a frank discussion with Trump but did not reach a final agreement.

G7 leaders prepared several draft documents seen by Reuters, including on migration, artificial intelligence, and critical minerals. None of them have been approved by the United States, according to sources briefed on the documents.

Without Trump, it is unclear if there will be any declarations, a European diplomat said.

Carney also invited non-G7 members Mexico, India, Australia, South Africa, South Korea and Brazil, as he tries to shore up alliances elsewhere and diversify Canada's exports away from the United States.

Canada's relationship with India has been tense since former Canadian Prime Minister Justin Trudeau in 2023 accused India's government of involvement in the June 18, 2023, murder of Hardeep Singh Nijjar, a Sikh separatist leader in Canada.

Modi's government has denied involvement in Nijjar's killing and has accused Canada of providing a safe haven for Sikh separatists. It is Modi's first visit to Canada in a decade.

Source: Reuters

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Economic

Commodity

Weak Steel Demand in China and Seasonal Construction Slowdown

Iron ore futures in Singapore have fallen for four consecutive days, dipping below $93 per ton. This decline follows data from China, the world's largest iron ore importer, showing a sharp drop in steel production in May. Steel output for the month was 7% lower compared to the previous year and below the daily production level of April. This marks the weakest performance for May since 2018, reinforcing fears of sustained low demand for steel and iron ore.

The rainy season in southern China, combined with high temperatures in the northern regions, has disrupted construction activity, which is a key driver of steel demand. The Shanghai Metals Market pointed out that adverse weather conditions have significantly slowed the pace of construction, further dampening demand for iron ore.

Citi Lowers Iron Ore Price Forecasts Amid Supply and Demand Imbalances

As demand for steel remains weak, Citigroup has revised its iron ore price forecasts downwards. The bank now expects prices to drop to $90 per ton over the next three months, down from the previous target of $100. For the six-to-twelve-month outlook, Citi lowered its target from $90 to $85 per ton, reflecting ongoing concerns about the Chinese property market and its impact on steel consumption. Additionally, China's manufacturing sector faces growing trade headwinds, further adding to the uncertainty surrounding demand.

On the supply side, Brazil, the second-largest exporter of iron ore after Australia, has been increasing its shipments. In May, Brazil's iron ore exports reached a record high for the month, totaling 35.077 million tons. While this increase in supply may help meet global demand, it adds to the downward pressure on prices, as the market is already grappling with excess inventory and weak demand.

As of 4:20 p.m. in Singapore, iron ore futures stood at $92.65 per ton, marking a 1.5% decline for the day. Steel futures in China also followed the downward trend, further highlighting the struggles in the iron ore market.

Iron ore prices are under significant pressure due to a combination of weak demand from China, seasonal slowdowns in construction, and a global oversupply. Citi's revised forecasts reflect the challenges in the market, with ongoing concerns over China’s steel production and the broader economic slowdown. The supply-side adjustments from Brazil and Australia may help balance the market in the long term, but the short-term outlook remains bleak, with iron ore prices expected to continue their decline over the coming months.

Source: Reuters

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Glendon

Economic

Forex

Investor confidence in Germany’s economy improved more than anticipated as a forthcoming surge in public spending outweighs fears over looming US tariffs.

An expectations index by the ZEW institute increased to 47.5 in June from 25.2. the previous month. That’s way above the 35 median estimate in a Bloomberg survey. A measure of current conditions also gained.

The outcome “seems to strengthen the assessment that the fiscal policy measures announced by the new German government can provide a boost to the economy,” ZEW President Achim Wambach said Tuesday in a statement. “Combined with the recent interest-rate cuts by the European Central Bank, this could bring economic stagnation in Germany, which has lasted for almost three years, to an end.”

While Europe’s largest economy grew more than anticipated at the start of the year, views differ as to whether momentum will fade or turn into a sustainable recovery. Despite the recent uptick being partly down to firms and exporters front-running US tariffs, private consumption and investments also surged.

Analysts surveyed by Bloomberg expect the country to return to growth in 2025 after two years of contraction. They see gross domestic product increasing 0.2% — a rosier outlook than the stagnation anticipated by most other forecasters recently.

Bundesbank President Joachim Nagel said Monday that the recent upward revision to first-quarter output data could push the outcome for 2025 above zero. So far, the central bank expects stagnation.

Nagel went further, saying Germany could become a “success story” if politicians decisively tackle its structural problems. The Bundesbank projects growth of 0.7% and 1.2% in 2026 and 2027, mainly thanks to higher defense and infrastructure outlays.

Others are even more optimistic. The Ifo Institute last week raised its projection by 0.7 percentage point to 1.5%, citing higher fiscal spending. The IfW in Kiel expects expansion of 1.6%.

Source: Bloomberg Europe

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Daniel Carter

Political

Middle East Situation

Trump made the comments during his midnight departure from Canada, where he attended the Group of Seven nations summit on Monday, according to comments posted by a CBS News reporter on social media platform X.

Trump predicted that Israel would not be easing its attacks on Iran. "You're going to find out over the next two days. You're going to find out. Nobody's slowed up so far," the CBS journalist quoted Trump as saying on Air Force One.

He said "I may", on the prospect of sending U.S. Middle East Envoy Steve Witkoff or Vice President JD Vance to meet with Iran.

Washington has said Trump was still aiming for a nuclear deal with Iran, even as the military confrontation unfolds.

World leaders meeting at the Group of Seven summit called for a de-escalation of the worst-ever conflict between the regional foes, saying Iran was a source of instability and must never have a nuclear weapon while affirming Israel's right to defend itself.

Trump, who left the summit early due to the Middle East situation, said his departure had "nothing to do with" working on a deal between Israel and Iran after French President Emmanuel Macron said the U.S. had initiated a ceasefire proposal.

"Wrong! He has no idea why I am now on my way to Washington, but it certainly has nothing to do with a Cease Fire. Much bigger than that," Trump wrote on his Truth Social platform late on Monday.

Israel launched its air war with a surprise attack that has killed nearly the entire top echelon of Iran's military commanders and its leading nuclear scientists. It says it now has control of Iranian airspace and intends to escalate the campaign in the coming days.

Trump has consistently said the Israeli assault could end quickly if Iran agreed to U.S. demands that it accept strict curbs on its nuclear programme.

"Simply stated, IRAN CAN NOT HAVE A NUCLEAR WEAPON. I said it over and over again! Everyone should immediately evacuate Tehran!" Trump said on Monday.

Iran's Revolutionary Guards said on Tuesday that a "more powerful" new wave of missiles was recently launched towards Israel, the state news agency reported. A senior Iranian army commander said a new wave of drones would hit Israel.

Three people were killed and four injured in Iran's central city of Kashan in an Israeli attack, Iran's Nournews reported on Tuesday.

EXPLOSIONS, AIR DEFENCE FIRE

Iranian media also reported explosions and heavy air defence fire in Tehran early on Tuesday, with smoke rising in the city's east after an explosion of suspected Israeli projectiles. Air defences were activated also in Natanz, home to key nuclear installations 320 km (200 miles) away, the Asriran news website reported.

Doctors and nurses have been recalled from leave to carry out their duties, Iranian media reported.

Khorramabad city MP Reza Sepahvand told the Iranian labour news agency that most incidents happening in Iran are due to "infiltrators" rather than direct action from Israel, adding that 21 people were killed in the western province of Lorestan.

World oil markets are on high alert for any developments in the conflict that could hit global supply.

A shipping incident near the Strait of Hormuz, off the coast of the United Arab Emirates early on Tuesday morning was not security related but a result of ships colliding. The UAE coast guard said it had evacuated 24 people from oil tanker ADALYNN following a collision between two ships in the Gulf of Oman, near Hormuz. About a fifth of the world's total oil consumption passes through the waterway.

Naval sources have told Reuters that electronic interference with commercial ship navigation systems has surged in recent days around the Strait of Hormuz and the wider Gulf, which is having an impact on vessels sailing through the region.

Israel's military said on Tuesday that it killed Iran's wartime chief of staff. Israel also said it carried out extensive strikes on Iranian military targets including weapons storage sites and missile launchers.

Iranian officials have reported 224 deaths, mostly civilians, while Israel said 24 civilians had been killed. Israeli Finance Minister Bezalel Smotrich said nearly 3,000 Israelis had been evacuated due to damage from Iranian strikes.

Sources told Reuters that Tehran had asked Oman, Qatar and Saudi Arabia to urge Trump to pressure Israeli Prime Minister Benjamin Netanyahu to agree to an immediate ceasefire. In return, Iran would show flexibility in nuclear negotiations, according to two Iranian and three regional sources.

CHINESE URGED TO LEAVE ISRAEL

"If President Trump is genuine about diplomacy and interested in stopping this war, next steps are consequential," Iranian Foreign Minister Abbas Araqchi said on X. "Israel must halt its aggression, and absent a total cessation of military aggression against us, our responses will continue."

Iran denies seeking nuclear weapons and has pointed to its right to nuclear technology for peaceful purposes, including enrichment, as a party to the Nuclear Non-Proliferation Treaty.

Israel, which is not a party to the NPT, is the only country in the Middle East widely believed to have nuclear weapons. Israel does not deny or confirm that.

With security concerns growing and Israeli airspace closed because of the war, the Chinese embassy in Israel urged citizens to leave the country via land border crossings as soon as possible.

The conflict escalated on Monday with Israel attacking Iran's uranium enrichment facilities.

Rafael Grossi, head of the International Atomic Energy Agency, told the BBC that the Natanz plant sustained extensive damage, likely destroying 15,000 centrifuges, while Iran's Fordow plant remained largely intact.

Source: Reuters

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Economic

Slower Reduction in Bond Purchases

During its recent meeting, the BOJ's policy board announced a shift in its bond market strategy. Starting next fiscal year, the BOJ plans to decrease its monthly bond purchases by ¥200 billion ($1.34 billion), reducing the previous rate of ¥400 billion. This cautious move comes in response to recent turbulence in Japanese Government Bonds (JGBs), which have impacted global debt markets. The yen's exchange rate showed little movement following the announcement, while bond yields across various maturities increased slightly.

This decision highlights the BOJ's acknowledgment of the need for careful adjustments in its monetary policy. However, despite this shift, the central bank remains committed to reducing its involvement in the bond market, signaling its continued effort to normalize its policy framework. The BOJ’s strategy is also influenced by external factors, such as the ongoing geopolitical tensions, particularly in the Middle East, and the trade uncertainty caused by U.S. President Donald Trump's tariffs.

Economic Context and Future Projections

The BOJ's adjustment in bond purchase strategies reflects its balancing act between market stability and long-term economic normalization. While the central bank continues to face external pressures, such as the trade tariffs and potential recession risks, it remains focused on gradually tapering its asset purchases. By next year, the central bank intends to implement a quarterly reduction of ¥200 billion, which is set to last until the first quarter of 2027. These ongoing reductions still represent a significant commitment to maintaining liquidity in the financial system, as monthly purchases will remain substantial compared to pre-2013 levels.

Despite this slower withdrawal, concerns persist regarding Japan's fiscal policies and potential impacts on bond issuance. Political uncertainty, particularly ahead of the national elections, and the growing financial strain from trade tariffs pose additional risks. Although Prime Minister Shigeru Ishiba faces significant challenges, especially in balancing the national budget, economists expect potential tax changes, like sales tax reductions, which could further strain the country's financial resources.

Inflation and Rate Hike Considerations

Another key consideration in the BOJ's decision is Japan’s inflation trajectory. Inflation has been consistently rising, with recent figures showing an average of 2.9% over the past three years—well above the BOJ’s target. The cost of staple goods, such as rice, has risen dramatically, strengthening inflationary pressures. This trend has raised expectations that the BOJ may soon consider a rate hike, especially if inflation continues to climb despite global trade tensions.

In the wake of these developments, the BOJ's cautious approach to bond market withdrawal aligns with its broader strategy of gradually tightening policy without causing market instability. The eventual decision on interest rates will depend on how these economic dynamics evolve, particularly in light of any trade resolutions or further geopolitical shifts.

The Bank of Japan's decision to slow its bond market withdrawal is a prudent response to the current market volatility. While maintaining flexibility, the BOJ aims to balance inflationary pressures with its broader goal of economic normalization. The ongoing geopolitical and domestic challenges, along with inflationary concerns, will continue to influence the BOJ's future decisions, including the potential for interest rate hikes. With careful monitoring and adjustments, the central bank seeks to stabilize Japan’s economic outlook in an unpredictable global environment.

Source: Reuters

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Economic

Forex

Emerging Markets Local Currency Debt: A Potential Turning Point

Emerging market local currency bonds are experiencing a revival after years of stagnation, with inflows into bond funds reaching record levels. For the first time in years, these markets are witnessing a resurgence of interest, with the JPMorgan GBI Emerging Market local currency index at its lowest yields since 2022. As a result, emerging market local currency government bonds have seen returns exceeding 10% this year, outpacing the 4% return from hard-currency bonds.

The key drivers behind this resurgence are global shifts in economic conditions. The U.S. dollar, which had been a dominant global reserve currency, recently fell to its lowest point in over three years, prompting investors to seek higher returns in other markets. In particular, the weakening dollar and lower global interest rates are fueling demand for local currency bonds in markets like Brazil, Mexico, Indonesia, and India.

Reversal of Dollar Bull Market Trend

For over a decade, the global market has favored U.S. assets, driven by the "U.S. exceptionalism" trade. This trend saw foreign investors flocking to U.S. equities and bonds, bolstered by a strong dollar. However, as the dollar weakens, emerging market bonds are becoming more attractive. Investors are seeking better yields, especially as slower global growth and the likelihood of lower rates in developed markets reduce the returns available in traditional markets like the U.S. and Europe.

This shift has been described by market analysts as the end of a 14-year period during which emerging market local currency bonds were largely neglected. With the asset class now valued at approximately $13 trillion—double its size from 14 years ago—investors are beginning to revisit emerging markets in search of diversification and better returns.

Factors Supporting the Shift: Central Banks and Market Conditions

The current favorable environment for local currency bonds in emerging markets is driven by a combination of factors. Many emerging market central banks are cutting rates, which contrasts with the mixed outlook for rate cuts from the U.S. Federal Reserve. This divergence, along with the drop in the U.S. dollar, has created a "Goldilocks" moment for emerging markets, making local bonds increasingly attractive.

Countries like the Philippines, Czech Republic, Hungary, South Africa, and Brazil are highlighted as offering compelling value for investors looking for opportunities in emerging markets. Even small flows into these markets are expected to have a significant impact, given the smaller size of emerging market assets compared to U.S. assets.

While the flows into emerging market local currency bonds remain small, they represent a significant shift in investor sentiment. According to analysts, this shift could lead to steady, long-term growth for emerging market debt, with many expecting double-digit returns by the end of the year. Despite the gradual nature of this trend, the impact of these flows in the context of global capital markets could be meaningful, providing a boost to the asset class and signaling the end of a long period of neglect.

Source: Reuters

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Daniel Carter

Political

Middle East Situation

Key Points:

● Israeli airstrike kills Iran's military chief, Ali Shadmani, in Tehran.

● Linked to broader tactics disrupting Iran's command structure.

● No direct cryptocurrency impact observed relating to the strike.

Ali Shadmani, Chief of Staff of Iran's Armed Forces, was killed by an Israeli airstrike in Tehran on June 17, as confirmed by the Israel Defense Forces (IDF).

This assassination is part of Israel's ongoing strategy targeting Iran's military leadership, potentially affecting Middle East stability but not directly impacting crypto markets. According to a statement by the Israel Defense Forces, "The targeted killing of Shadmani marks another critical blow to Iran's military command structure amid ongoing hostilities and follows a series of recent assassinations aimed at dismantling the upper echelons of the Iranian armed forces. Israeli officials have described the operation as part of a broader strategy to disrupt Iran's ability to wage coordinated attacks in the region."

Israeli Tactics: Disruption of Iranian Military Leadership

The Israeli airstrike on June 17 resulted in the death of Ali Shadmani, Iran's Chief of Staff, in a rare precision attack in central Tehran. Israeli officials emphasized the operation as disrupting Iran's military capabilities.

These targeted killings continue a pattern over recent days, with Israel aiming to weaken Iran's leadership. Such operations are part of a broader regional security strategy amid escalating tensions.

Did you know? The targeted killing of military chiefs often marks shifts in regional power dynamics. Historically, similar actions have occasionally sparked transient volatility in global markets, yet current assessments suggest crypto markets remain stable.

Cryptocurrency Market Stability Amid Escalating Geopolitical Tension

Bitcoin currently prices at $106,979.35, with its market cap reaching $2.13 trillion and market dominance holding at 63.95%. Despite geopolitical events, Bitcoin's 24-hour trading volume soared to $53.80 billion with a moderate 0.26% increase over the same period. Price changes over 60 and 90 days indicate notable rises of 26.40% and 28.61%, respectively.

Bitcoin(BTC), daily chart, screenshot on CoinMarketCap at 06:44 UTC on June 17, 2025.

Experts suggest that while geopolitical tensions might spark sporadic volatility, the broader crypto ecosystem remains largely insulated from such military escalations, focusing instead on regulatory shifts and technological advancements in blockchain.