The U.S. Dollar is trading in mostly familiar ranges as markets try to form outlooks for the remainder of the year and watch for any progress in U.S. fiscal legislation.
Overview
Later today, U.S. President Donald Trump will visit Capitol Hill to speak to Republicans who seem willing to oppose his bills and try to unite the party behind his spending plans. The Tax-cut bill is expected to continue to face challenges when it progresses to the Senate as there are growing concerns over budget deficits. Meanwhile, markets do not seem to be enthusiastic about the uncertainty over both tariffs and U.S. government expenditures, which is likely to end a six-day streak of gains for equities in the S&P 500 Index.
Expect commentary later today from some Fed officials out of an event in Florida, including Susan Collins, who tends to be slightly “dovish.” Financial markets are betting that the U.S. Fed will feel the need to ease in the second half of this year when the effects of friction to trade and other slowdown dynamics make for underwhelming indicators. In terms of hard data, we will not have anything with potential for impact until Purchasing Managers Index figures for May come out on Thursday. We are also monitoring any major revelations that may come from the G-7 summit as policymakers discuss currency policies in their agenda.
What to Watch This Week…
- Purchasing Managers Index across regions on Thursday
- Monex USA Online is always open
The complete Economic Calendar can be found here.
AUD ⇓
The Australian Dollar is the biggest mover today, dropping about 1.0% of its value following an interest-rate cut of 25 basis points earlier. In their announcement, officials explained that they see trouble ahead. Trade wars may put further pressure on growth, which is why the Reserve Bank of Australia projects lower inflation as well as lower growth. Yields fell as the indication from policymakers seems to be that at their July 8th meeting a 50bps reduction may make sense to accommodate a fragile financial environment. When June starts, we will get a reading of Q1 Gross Domestic Product, expected to show 0.6% advancement. Anything less could mean Aussie has further room to sink.
MXN ⇑
The Mexican Peso is currently on the rise as markets try to make sense of U.S. policies on trade as well as domestic spending. The lack of faith in U.S. assets is holding up Peso value which has not been diminished even after central bank measures and signals that more cuts to borrowing costs are coming. No matter what, the currency remains popular in carry-trades, where traders exchange low-interest tender and exchange it for higher-yielding funds. MXN just hit a fresh best level over the Buck since mid-October 2024.
