United States
Yesterday, markets were abuzz with speculation that President Trump would fire Fed Chair Powell, which led to a significant drop in short-term rates, a steeper yield curve, and a sharp sell-off of the US dollar and stocks. However, after the White House walked back from these speculations, markets began to recover, although not fully. Today, the US dollar is showing resilience, mostly trading within the wide ranges seen yesterday.
Retail sales for June are set to be the first major data point today, with expectations of a slight increase after declines in the previous two months. Real personal spending was flat in the first quarter, and with existing data from April and May, it’s likely contracting in the second quarter. Import and export prices are also under the spotlight; the Trump administration has downplayed imported inflation, though data suggest otherwise. Import prices rose at a low rate in Q1, and forecasts imply a higher rate in Q2. Additionally, weekly jobless claims and business inventories will be monitored closely, with inventories thought to be declining after Q1 buildups, leading to potential price increases once the process stabilizes. Meanwhile, May’s TIC data may reveal continued interest in US assets despite prevailing narratives of waning demand.
Eurozone
The speculation surrounding Fed Chair Powell’s potential firing temporarily halted the euro’s five-day decline. Despite softer-than-expected Producer Price Index (PPI) numbers, North American participants initially moved to buy US dollars, pushing the euro to its lowest since late June. Reports about Trump allegedly seeking to fire Powell led to the euro rallying, with North American traders potentially caught off-guard. Once these rumors were dismissed, the euro retreated but showed signs of stabilization today, suggesting a possible bid above $1.1600.
United Kingdom
Sterling interrupted its eight-day losing streak amid the US dollar’s volatility, driven by the Powell rumors rather than positive UK-specific developments. Despite disappointing employment data showing a continued decline in payroll employment and a slight increase in the unemployment rate, the pound found some respite in the market’s positioning. The UK’s labor market weakening, reflected in falling earnings, adds to the likelihood of a rate cut next month, as priced in by the swaps market. Sterling remained above yesterday’s low, although it hasn’t managed to trade above $1.3430 today.
China
The US dollar traded briefly above CNH7.19 for the first time since late June, before a sell-off took it to session lows. The People’s Bank of China set the dollar’s reference rate at its lowest since November, offsetting slight increases in previous sessions. As China navigates the disruptions caused by the Trump administration, the country is poised to benefit from strategic moves, such as securing access to Nvidia AI chips in exchange for maintaining its supply of rare earths. China’s growing influence in technology and manufacturing sectors continues to shape global pricing power dynamics.
Japan
The US dollar’s brief surge above JPY149.20 was reversed by broad market events, with the yen finding stability just below JPY147. Japan’s improved trade balance is evident in the swing from a deficit to a surplus in June, following historical seasonal trends. Meanwhile, Ministry of Finance data indicates increased foreign interest in Japanese bonds, although Japanese equity purchases by foreign investors have waned. The yen’s movements reflect a balance between domestic economic improvements and external market influences.
Canada
The Canadian dollar saw a strong bid for the US dollar early yesterday, setting a new monthly high before the greenback retreated amid Powell narratives. Today, the US dollar targets a move higher, with CAD1.3800 as the next resistance. Canada’s upcoming May portfolio flows report may offer insights into investor sentiment, but currency performance is not solely dictated by these flows. Despite a net selling of Canadian assets earlier this year, the Canadian dollar appreciated against the US dollar, underscoring the complexity of currency valuations.
Australia
The Australian dollar experienced selling pressure yesterday, especially following a lackluster employment report. Job growth missed expectations significantly, with full-time job losses offsetting prior gains. The unemployment rate rose, partly explained by a slight increase in the participation rate. These factors pulled the Aussie lower, though it remains above the month’s low. The currency’s current level reflects broader market trends and Australia’s domestic economic challenges.
Mexico
The Mexican peso saw the US dollar initially bid higher before the Powell-related speculation prompted a reversal. Today, the dollar consolidates within a firm range, with a potential retest of recent highs. A move above MXN18.88 could signal renewed bullish sentiment for the dollar, although a break below MXN18.65 might suggest a pause in the upward correction. The peso’s movements are influenced by broader regional dynamics and market perceptions of emerging market currencies.
