The United States Dollar wrapped a dismal first half of the year and continued in much the same vein this morning, losing ground against all G10 currencies.
Overview
The Dollar Spot Index, a weighted average of USD’s performance against a basket of major currencies, declined by more than 10% in the first six months of the year – its biggest first-half drop since 1973 – and is trading down further this morning. Several risk factors for today indicate that further weakness could be in store as well, and a near-term turnaround for the Buck doesn’t look likely. Both fiscal and monetary policy are top of mind for traders heading into the back half of 2025, along with continued developments in trade policy, all of which are spelling doom for the Dollar.
Domestically, the focus on the Administration’s proposed One Big Beautiful Bill and its journey through Congress is injecting further uncertainty into the US’ fiscal situation. The bill as proposed could raise the US’ debt profile by upwards of $3 trillion over the next decade, adding to already mounting concerns as the US’ spending barrels toward its approved debt ceiling even should this major tax and spending package not pass Congress. Foreign investment in US government debt has already declined in the first half of this year and this trend looks likely to continue, reading overall Dollar bearish. Internationally, Federal Reserve Chair Jerome Powell is set to speak at the Sintra economic summit this morning along with his European counterpart Christine Lagarde, coming after two voting members of the FOMC have called for an interest rate cut in July. Though markets don’t necessarily believe a cut will happen this soon, chatter surrounding a potential early replacement for Powell from President Trump has driven the central bank’s outlook much more dovish than even just a few weeks ago. Finally, trade negotiations with major partners around the world are continuing ahead of a self-imposed July 9th deadline at which time the Liberation Day reciprocal tariffs will come back into effect. The Eurozone last night indicated that they may be willing to accept a 10% baseline tariff but with notable exceptions, and discussions remain ongoing. All told, the Buck overall is at or just off its lowest levels in roughly 4 years against most major currencies, and there’s little on the docket in the next couple weeks that could materially reverse its fortunes.
What to Watch This Week…
- Jerome Powell Sintra Speech, Tuesday
- US Non-farm payrolls, Thursday 8:30AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The single currency’s bull run is continuing this morning, and should today’s levels hold EUR will post 9 straight days of gains versus the Buck, a streak matched only three times since the currency’s inception in 1999. Eurozone inflation prints came in mostly on expectations, showing headline growth of 2.0% year-over-year. The Eurozone’s manufacturing PMI print, though still showing a slight contraction in the sector, did beat expectations slightly. The economic bloc is showing decent signs of a brightening economic outlook, primarily driven by Germany’s massive spending package passed earlier this year.
JPY ⇑
Japanese Yen is the top performer in the G10 today, gaining two-thirds of a percent versus USD. The Bank of Japan’s quarterly Tankan survey, released overnight, showed that economic sentiment amongst the country’s top manufacturers climbed in the last 3 months, showing more optimism than expected and bolstering expectations for a rate hike from the BoJ at some point during the back half of this year. Japan’s 10-year bond auction also showed fairly strong demand, reaching their lowest yield in nearly a month and helping to boost JPY.
