Following the continuation of positive trading through yesterday afternoon, the United States Dollar is mixed against its G10 peers this morning amidst month-end flows
Overview
The Federal Reserve, as expected, declined to cut interest rates yesterday, leaving the US’ target rate at 4.25-4.5%. Chair Jerome Powell, however, leaned substantially more hawkish than markets had anticipated, driving the Dollar stronger into the US close on Wednesday. After the Fed’s preferred inflation gauge of PCE released this morning showed prices continued to accelerate a touch faster than expected in June, the Buck is set to close out its strongest month this year.
Even though the FOMC held steady and Powell leaned hawkish, within the voting members olf the central bank there was a markedly high level of dissent. Two members of the FOMC, Waller and Bowman, voted to cut interest rates by 25 basis points, the first time two members have dissented since 1993. Nonetheless, Powell emphasized through his press conference following the decision that there is a solid chance interest rates will remain higher for longer than markets may have previously anticipated, boosting the Buck through the close yesterday. President Trump, for his part, expressed his displeasure with the decision on social media last night, renewing his attacks on Chair Powell after a very short-lived détente. Market expectations for a 25 basis point cut in September have now been shifted later this year, and traders now expect the easing cycle to begin in October instead.
The busy week continued this morning with the release of PCE, showing that inflation increased a touch more than expected in June. Personal income and spending remained relatively steady, all while initial jobless claims were below the expected figure for the fifth straight week. All data this week has served to bolster the case for the ‘higher for longer’ interest rate path that Powell hinted toward yesterday. The week’s releases, however, are not done just yet. US employment data due out tomorrow morning promises, as always, to be a major market mover. Traders currently expect the US economy to have added 104,000 jobs in July, well below June’s addition of 147,000.
What to Watch This Week…
- Non-Farm Payrolls JUN, Friday 8:30AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The single currency, after its worst 5-day performance in several weeks, is attempting to stage a comeback this morning and is trading slightly stronger against USD at the US open. Following a fall of more than 2 percent in just one week, it appears that much of the EUR’s rebound this morning can be chalked up to profit-taking and month-end real-currency flows. Markets did receive a slew of individual inflation figures for nations in the Eurozone today. German inflation slowed below the European Central Bank’s target of 2% for the first time in nearly a year, and French inflation held steady below the 2% target as well, serving to boost bets on further easing from the European Central Bank.
JPY ⇓
Japanese Yen continues its slide against all major peers amidst month-end trading this morning, reaching its weakest level against USD since before April 2nd’s Liberation Day tariff announcements from the US. Markets are moving a touch more risk-forward this morning, keeping the traditional haven JPY depressed. As the 90-day pause in reciprocal tariffs expires tomorrow morning, a flurry of trade deals between the US and many nations this week have bolstered global risk sentiment.
