The dollar index (DXY00) is down by -0.20% and posted a 3-1/4 year low. The dollar remains under pressure on uncertainties over US trade policies with many nations trying to negotiate trade deals with the US before President Trump's July 9 deadline. Also, rising deficits are bearish for the dollar as the Congressional Budget Office estimates the measure would add nearly $3.3 trillion to US deficits over the next ten years. The dollar extended its losses after the June MNI Chicago PMI unexpectedly contracted by the most in 5 months.
Losses in the dollar are limited by signs of progress in trade negotiations with China and the EU. Also, trade talks are back on with Canada after it withdrew a digital services tax. In addition, Indian and Japanese trade negotiators extended their stay in the US this week to iron out trade deals.
The US June MNI Chicago PMI unexpectedly fell -0.1 to 40.4, weaker than expectations of an increase to 43.0 and the weakest report in 5 months.
Atlanta Fed President Bostic said much of the tariff pricing hasn't shown up in the marketplace yet, and he projects one 25-bp rate cut this year and three rate cuts in 2026.
The markets are discounting a 19% chance of a -25 bp rate cut at the July 29-30 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.16%. The euro is moving higher today but remains just below last Friday's 3-3/4 year high. The dollar's weakness today is supporting the euro. However, gains in the euro are limited by weak economic news from the Eurozone and dovish comments from the ECB. German May retail sales fell more than expected, and the German June CPI rose less than expected, dovish factors for ECB policy and negative factors for the euro. Also, ECB Vice President Guindos said he expects growth in the Eurozone in the second and third quarters this year “will be almost flat.”
German May retail sales unexpectedly fell by 1.6% m/m, weaker than expectations of a +0.5% m/m increase and the biggest decline in more than 2-1/2 years.
The German Jun CPI (EU harmonized) rose +0.2% m/m and +1.7% y/y, weaker than expectations of +0.3% m/m and +1.8% y/y.
ECB Vice President Guindos said the Eurozone economy is stalling because of the “brutal uncertainty” surrounding global trade policy and that second and third quarter growth “will be almost flat.”
