From Marc to Market:
Overview: The dollar's latest leg down began with the President Trump's heightened attacks on the Federal Reserve's conduct of US monetary policy on June 23. That move may be over. Perhaps helped by stronger than expected data yesterday and the rise in US rates. US rates have edged up further today, and the greenback is firmer against the G10 currencies. In a firmer US dollar environment, the Canadian dollar typically outperforms on the crosses and today is no exception. The Canadian dollar is off marginally. On the other hand, the yen is the weakest, off around 0.50%. Trump's protest that Japan does not buy rice from the US seems factually confused, but the end of the hiatus from the reciprocal tariffs is a week away and investors are on edge. Most emerging market currencies are also softer today, but foreign equity purchases and dollar sales by Taiwan exports saw the Taiwanese dollar surge. The central bank may have moved to cap its gains. The opposite took place in Hong Kong, where the HKMA intervened to cap the US dollar.
Benchmark 10-year yields are mostly 2-5 bp firmer in Europe. German Bunds are a notable exception and the yield is flat. The 10-year Gilt yield has risen by five bp despite speculation that the BOE may reduce its sale of bonds from its balance sheet. The 10-year Treasury yield, which dipped below 4.20% yesterday for the first time in two months, is trading near 4.28% now. It has not traded above 4.30% in a week. Equities were mixed in Asia Pacific but are posting their first gain of the week in Europe. The Stoxx 600 is up almost 0.50% in late European morning turnover. US index futures are firm. Gold is consolidating in quiet activity after recovering by about $110 from Monday's low to Tuesday's high. For the sixth consecutive session, August WTI is chopping between roughly $64.50 and $66.50.
USD: The combination of stronger than expected US data, Fed Chair Powell's warning of coming price pressures, and the backing up of US rates, saw the Dollar Index recover from early losses that carried it to the lowest level since February 2022 (~96.35). It is firm but holding below 97.00....
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They appear to be on R&R, getting ready to go back to work:
