Rich Asplund
4 min read
In This Article:
The dollar index (DXY00) today is down by -0.32%. The dollar today added to Monday’s losses and posted a 3-1/3 year low. The dollar remains under pressure due to uncertainties over US trade policies, with many nations trying to negotiate trade deals with the US before President Trump’s July 9 deadline.
Also, rising deficits are bearish for the dollar as the Congressional Budget Office estimates the Republicans’ reconciliation bill making its way through Congress would add nearly $3.3 trillion to US budget deficits over the next ten years. The dollar recovered most of its losses on today’s stronger-than-expected ISM manufacturing and JOLTS job openings reports.
The US June ISM manufacturing index rose +0.5 to 49.0, stronger than expectations of 48.8. Also, the June ISM prices paid sub-index rose +0.3 to 69.7, stronger than expectations of 69.5.
US May JOLTS job openings unexpectedly rose +374,000 to a 6-month high of 7.769 million, showing a stronger labor market than expectations of a decline to 7.300 million.
Fed Chair Powell said he expects the impacts of tariffs to show up in inflation data over the coming months, but the impact could be “higher or lower, or later or sooner than we expected.”
The markets are discounting a 21% chance of a -25 bp rate cut at the July 29-30 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.10% and posted a new 3-3/4 year high. The euro has moved higher for nine consecutive sessions as the dollar’s broad weakness benefits the euro. The euro also garnered support from today’s economic news that showed an upward revision to the Eurozone June manufacturing PMI and stronger-than-expected German labor market news.
The euro fell back from its best levels on comments from ECB Governing Council member Kazaks, who said significant gains for the euro could warrant another ECB rate cut. Also, today’s inflation news was dovish on balance and was bearish for the euro.
The Eurozone June CPI edged up to +2.0% y/y from +1.9% y/y in May, right on expectations. The June core CPI was unchanged from May at +2.3% y/y, right on expectations.
The ECB May 1-year CPI inflation expectations unexpectedly eased to +2.8% from +3.1% in Apr versus expectations of no change at +3.1%. The May 3-year CPI expectations unexpectedly eased to +2.4% from +2.5% in Apr versus expectations of no change at +2.5%.
