The US dollar weakened against most major and emerging market currencies following dovish remarks from a Federal Reserve official, who suggested a possible interest rate cut this month. This softened the dollar's momentum, despite robust foreign purchases of US securities in May—over $311 billion, vastly exceeding the total for the year's first five months. Meanwhile, Washington introduced a hefty tariff of 93.5% on Chinese graphite, raising concerns about the rising costs in the US electric vehicle battery sector. Global equity markets mostly gained, with US futures steady and gold slightly higher, while oil prices surged due to fresh EU sanctions targeting Russian crude exports.
Asia Pacific Markets
The Japanese yen remained under pressure as the dollar tested resistance near JPY149. Despite a softening in Japanese government bond yields, the currency lacked strength amid stable inflation figures. A core inflation measure, excluding food and energy, unexpectedly rose, underscoring persistent price pressures. Political uncertainty also loomed ahead of an upper house election, where the ruling coalition risks losing control.
Meanwhile, the Australian dollar dropped to a monthly low after underwhelming job data. Although it found some support above $0.6520, its failure to close below key technical levels weakened the bearish momentum. Barring a strong rebound, the Aussie seems headed for its first weekly decline in four weeks.
European Markets
The euro, after breaking a six-day losing streak, saw renewed selling and touched a new monthly low near $1.1555. However, it later recovered modestly, trading closer to the $1.1645 range. If it fails to surpass $1.1690, it will mark the first two-week decline since mid-May. Eurozone trade data showed a narrowing current account surplus but a modestly widening trade balance, suggesting resilience despite growing Chinese competition.
In the UK, disappointing economic indicators—including a surprise GDP contraction and weak job figures—continued to weigh on sterling. Although it held above recent lows, sterling’s performance remains fragile. Still, rising year-end rate expectations provided some limited support.
American Markets
The US dollar gained earlier in the week on the back of stronger-than-expected retail sales, easing import prices, and a consistent drop in weekly jobless claims. These positive signals pushed the Dollar Index above its two-month trading range. However, momentum faded, and the index is now trending slightly lower. The currency's performance could hinge on upcoming housing start data, following May’s steep decline. Fed officials largely agree on maintaining current rates, though Governor Waller hinted at a possible cut. Meanwhile, consumer confidence data is awaited, with inflation expectations staying elevated. These figures may influence adjustments to Q2 GDP forecasts, set for release at the end of July.