Rich Asplund
4 min read
The dollar index (DXY00) today is down by -0.41% at a 1-week low. The dollar retreated after President Trump announced a tentative ceasefire between Israel and Iran, which curbed safe-haven demand for the dollar. Also, today's rally in stocks has reduced liquidity demand for the dollar. The dollar weakened further today after an unexpected decline in the Conference Board US June consumer confidence index.
Losses in the dollar are contained due to hawkish commentary from Fed Chair Powell and Atlanta Fed President Bostic, who said they are in no hurry to cut interest rates.
The US Apr S&P CoreLogic composite-20 home price index rose +3.42% y/y, weaker than expectations of +3.90% y/y and the smallest increase in 1-3/4 years.
The Conference Board US Jun consumer confidence index unexpectedly fell -5.4 to 93.0, weaker than expectations of an increase to 99.8.
The US June Richmond Fed manufacturing conditions survey unexpectedly rose +2 to -7, stronger than expectations of a decline to -10.
Comments from Fed Chair Powell signal he is no rush to cut interest rates when he said, "The effects of tariffs will depend, among other things, on their ultimate level, and for the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance."
Atlanta Fed President Bostic said the Fed doesn't need to cut interest rates, with companies planning to raise prices later this year in response to higher import taxes and with the job market still stable.
The markets are discounting the chances at 17% for a -25 bp rate cut after the July 29-30 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.33% and posted a 1-1/2 week high. Today's dollar weakness is benefiting the euro. The euro was also boosted by news that theGerman Jun IFO business climate index rose to a 13-month high. In addition, today's increase in the 10-year German bund yield to a 1-week high strengthened the euro's interest rate differentials. Dovish comments today from ECB Governing Council member Villeroy de Galhau are limiting gains in the euro, as he stated that the ECB can still cut interest rates within the next six months.
