Rich Asplund
4 min read
The dollar index (DXY00) Friday fell by -0.21%. The dollar came under pressure Friday on an easing of safe-haven demand after Reuters reported that the Iranian government said it is ready to discuss limitations on its uranium enrichment levels. Also, President Trump said he is willing to give diplomacy more time and won't decide to strike Iran for another two weeks.
In addition, dovish comments Friday from Fed Governor Waller weighed on the dollar when he said, "I think we have room to bring interest rates down as early as July, and then we can see kind of see what happens with inflation." The dollar remained lower on the weaker-than-expected Philadelphia Fed business outlook report.
The US June Philadelphia Fed business outlook survey was unchanged at -4.0, weaker than expectations of an increase to -1.5.
US May leading economic indicators index fell -0.1% m/m, right on expectations, and the sixth consecutive month that the LEI has declined.
The markets are discounting the chances at 15% for a -25 bp rate cut after the July 29-30 FOMC meeting.
EUR/USD (^EURUSD) Friday rose by +0.30%. The euro moved higher on Friday due to weakness in the dollar. However, gains in the euro were limited after the Eurozone's June consumer confidence index unexpectedly fell and after German May producer prices posted their biggest decline in eight months, which were dovish factors for ECB policy.
The Eurozone June consumer confidence index unexpectedly fell -0.1 to -15.3, weaker than expectations of an increase to -14.9.
German May PPI fell -1.2% y/y, right on expectations and the biggest decline in 8 months.
Swaps are discounting the chances at 7% for a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) Friday rose by +0.38%. The yen gave up overnight gains and fell to a 3-week low against the dollar Friday as an easing of Middle East tensions curbed safe-haven demand for the yen. Reuters reported that the Iranian government said it is ready to discuss limitations on its uranium enrichment levels, and President Trump said he's willing to wait two weeks to see if diplomacy will work before attacking Iran.
The yen initially moved higher Friday after Japan's May national CPI excluding fresh food and energy rose more than expected by the most in 16 months, a hawkish factor for BOJ policy. Also, comments from BOJ Governor Ueda were positive for the yen when he said the BOJ will raise the benchmark interest rate if its economic outlook is realized.
