Rich Asplund
5 min read
In This Article:
The dollar index (DXY00) today is down by -0.49% at a 3-1/4 year low. The dollar retreated today following a Wall Street Journal report that said President Trump is considering accelerating when he will announce the next Fed Chair. The dollar remained lower after today’s US economic news of a downward revision in Q1 GDP and a wider-than-expected May trade deficit report, which was a bearish factor for Q2 GDP.
The dollar received underlying support from stronger-than-expected initial unemployment claims, core capital goods orders, and pending home sales reports. Also, hawkish comments from Richmond Fed President Barkin were supportive of the dollar when he said he favors waiting for more clarity before adjusting interest rates.
US weekly initial unemployment claims fell -7,000 to 236,000, showing a stringer labor market than expectations of 243,000. However, weekly continuing claims rose +37,000 to a 3-1/2 year high of 1.974 million, above expectations of 1.950 million, signaling more people are staying out of work for longer.
US Q1 GDP was revised lower to -0.5% (q/q annualized), weaker than expectations of no change at -0.2% as Q1 personal consumption was revised downward to +0.5% from +1.2%. The Q1 core PCE price index was revised higher to +3.5% (q/q annualized), stronger than expectations of no change at +3.4%.
US May capital goods new orders nondefense ex-aircraft and parts rose +1.7% m/m, stronger than expectations of +0.1% m/m and the largest increase in 4 months.
The US May trade deficit of -$96.6 billion was wider than expectations of -$86.1 billion, a negative factor for Q2 GDP.
US May pending home sales rose +1.8% m/m, stronger than expectations of +0.1% m/m.
Richmond Fed President Barkin said he expects tariffs will put upward pressure on prices, and with so much still uncertain, he favors waiting for more clarity before adjusting interest rates.
The dollar retreated today after the Wall Street Journal reported that President Trump may announce Fed Chair Powell’s replacement as soon as September, an unusually early appointment. That reinforced expectations of a more dovish leaning Fed, after Trump criticized Powell for holding interest rates steady. Because Powell’s term expires in May 2026, announcing a new Fed chair far earlier than the traditional three-to-four-month transition period could allow the chair-in-waiting to influence expectations about the likely path for interest rates. An overly dovish Fed would likely produce higher inflation, which depreciates the value of the dollar.
