The United States Dollar has settled into calmer waters this morning after whipsawing during yesterday’s sessions, opening today stronger across most currencies than at Wednesday’s open
Overview
Though US data, generally speaking, has been fairly benign this week, price action has been mostly headline-driven. Following smoother movements at the start of the US session yesterday, the Dollar Spot Index tumbled as much as 0.8% on multiple reports that President Trump was actively seeking for a way to fire Federal Reserve Chair Jerome Powell, but Trump himself attempted to quash such speculation less than an hour later.
Many news outlets reported mid-morning on Wednesday that Trump had drafted a letter to can the US’s top central banker and asked Congressional Republicans for their input. The tension between Powell’s Fed and the Trump Administration has been-well documented during this term, but yesterday’s reported initially looked much more concrete and immediately spooked markets across all asset classes, with equities and the Dollar sent tumbling and Treasuries rallying. Though Trump himself denied these reports and claimed he wasn’t looking to axe Powell – save for in the case of “fraud” – this reporting has served to keep risk premia high through the remainder of trading yesterday and into this morning. Some strategists have suggested that, should Trump follow through on this action, USD could lose as much as three percent that day with further losses to come. All signs point to heightened scrutiny on the Fed and tension with the executive branch at least until Powell’s term is up early next year.
Retail sales for June was also released this morning to little fanfare, showing that US consumers are remaining unexpectedly strong in the face of price increases shown earlier this week in CPI data. Import prices also surprised to the downside, remaining flat last month and actually contracting on a year-over-year basis while export prices grew more than expected. The economic narrative for the US remains murky at best as GDP showed a contraction last quarter. The first GDP reading for Q2 is due out the morning of the Federal Reserve’s next interest rate decision, promising further heightened volatility to close out the month on July 30th.
What to Watch This Week…
- US Housing Starts JUN, Friday 10AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
AUD ⇓
The Antipodean currencies are sliding much more than the rest of their major peers this morning, with AUD and NZD falling 1% and 0.6% versus the Buck respectively. Though it’s likely much of this move is risk-driven as AUD continues to be a strong bellwether for global risk sentiment, Australia also released surprisingly negative employment data overnight showing that unemployment grew last month to 4.3% from 4.1%. This marks its highest unemployment rate since 2021 and has immediately translated into odds increasing on easing from the Reserve Bank of Australia, now expected to cut rates at each of its next two meetings.
JPY ⇓
The single currency has steadied after a wildly volatile US session yesterday, settling lower versus USD by close to half a percent than at the close. The Eurozone’s final CPI reading for June showed no changes frojm the preliminary release, showing price growth of 2% and core price growth of 2.3% annually. This does give the European Central Bank a bit more room to ease this year, as economic growth in the region remains sluggish. Germany also rejected the European Commission’s proposal regarding their budget expansion, showing that as we surmised was possible earlier this year the expected massive fiscal injection to promote regional growth may be more difficult to implement than expected initially.
