- We identify new battlefields and currency conflicts in the post-ceasefire landscape.
- Last week’s ECB Forum in Sintra saw major central banks moving to retire the crisis playbook.
- EU leaders elevated the CNYs undervaluation as a structural driver behind the bloc’s trade deficit .
- Sino-Japanese relations are getting tense as Tokyo expands its strategic and military outreach in A
- We look into USD trends before the US mid-term elections.
Related Insights
- Research Library06 Jul 2026
- The Week Ahead: Forecasts, data preview, central bank watch03 Jul 2026
- GDP Nowcast: India’s GDP growth likely to moderate in 2Q 01 Jul 2026
Click here to read the full report.
Commentary: New battlefields and currency conflicts
The June Memorandum of Understanding between the US and Iran may have temporarily quieted the physical crossfire and allowed the Strait of Hormuz to reopen, but other global economic tensions remain. By shifting the conflict from active military engagement to structural and economic leverage, the post-ceasefire landscape is morphing into a complex war of attrition across new battlefields.
The strongest message from last week’s European Central Bank Forum in Sintra is that central banks are retiring the crisis playbook used since the Global Financial Crisis. Faced with supply chain fragmentation, structural energy shifts from the recent conflicts, and the rapid onset of artificial intelligence, ECB President Christine Lagarde and new Fed Chair Kevin Warsh have led the way in retiring forward guidance. In moving out of the reactive crisis management mode that dominated the early 2020s, central banks are shifting to a more agile and less predictable framework to navigate a fractured global landscape, i.e., an unwillingness to underwrite market uncertainty.
In mid-June, while the hawkish FOMC dominated the spotlight, the G7 Summit in France officially prioritized combating the China 2.0 Shock, which threatens high-value, innovative green and tech sectors in the West. During the late-June European Council in Brussels, EU leaders formally elevated the CNY’s undervaluation (estimated at 20-40%) as a structural driver behind the bloc’s unprecedented EUR360bn trade deficit with China. US Senators Elizabeth Warren (D-Mass.) and Rick Scott (R-Fla.) seized the momentum to send a bipartisan letter to US Treasury Secretary Scott Bessent to redesignate China as a currency manipulator.
However, an outright currency war with China is unlikely because the significant and influential EU nations fear retaliatory damage to their industries and are targeting more Chinese investments in their countries. Due to President Trump’s focus on global tariffs in his second term, Bessent considered the undervalued CNY more of a European than an American problem. Moreover, Presidents Trump and Xi Jinping are prioritizing personal diplomacy this year, with three more meetings this year – Xi’s potential US visit in September, the APEC Summit (Shenzhen) in November, and the G20 Summit (Miami) in December.
Sino-Japanese relations are getting tense as Tokyo expands its strategic and military outreach to contain China’s regional dominance. During an India-Japan summit on July 3, Prime Ministers Narendra Modi and Sanae Takaichi established an extensive economic roadmap targeting semiconductors, artificial intelligence, quantum technology, and critical minerals. Beyond India, Japan also drew red lines over a Taiwan invasion, deployed troops to the Philippines under a new defence pact, co-developed hypersonic weaponry through AUKUS Pillar II, and choked off China's access to advanced semiconductor manufacturing equipment.
As for the November 3 midterm elections, don’t expect the same speculative optimism that boosted the USD ahead of Trump’s victory in the 2024 Presidential elections. With Trump’s broken promises driving his low approval ratings, prediction markets expect the Democrats to flip the House and the Republicans to maintain a narrow edge to hold the Senate. Consequently, the outlook for the USD is increasingly balanced, favouring two-sided volatility rather than a sustained, unidirectional trend.
Click here to read the full report.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
[1] This disclaimer may not apply if the applicable assets fall within the definition of 'financial instruments' that are set out in Article 2(1) EU MAR (e.g. financial instruments that are traded on a regulated market, MTF or OTF, etc.). Section C of Annex I of MiFID2 specifies these 'financial instruments'.
Related Insights
- Research Library06 Jul 2026
- The Week Ahead: Forecasts, data preview, central bank watch03 Jul 2026
- GDP Nowcast: India’s GDP growth likely to moderate in 2Q 01 Jul 2026
Related Insights
- Research Library06 Jul 2026
- The Week Ahead: Forecasts, data preview, central bank watch03 Jul 2026
- GDP Nowcast: India’s GDP growth likely to moderate in 2Q 01 Jul 2026