Dollar lower on Israel-Iran ceasefire
The surprise news overnight – announced by Donald Trump – that Israel and Iran have agreed a ‘complete and total’ ceasefire is weighing on the dollar this morning. The US currency, which lost quite a bit of ground during the course of yesterday’s session following dovish Fed interest rate talk, has weakened to $1.16 against the euro, not far off its year-to-date low of circa $1.1630 set a couple of weeks ago, and to almost $1.36 against sterling. The euro-pound exchange rate is not much changed from this time yesterday morning, hovering in and around £0.8550.
The latest developments in the Middle East sees oil prices lower with Brent crude falling further to just under $69 per barrel, now down more than $10 from last week’s highs. European equity markets have opened strongly in positive territory this morning, up almost 2%, after solid gains in Asian markets overnight and a late rally in US stocks into yesterday’s New York close, while Euro area and UK government bond yields are little changed at the start of play today.
Fed Governor Bowman, normally a hawk in monetary policy matters, says it’s time for the central bank “to consider” cutting interest rates, noting that “should inflation pressures remain contained,” she would “support lowering the policy rate as soon at our next meeting (in July) in order to bring it close to its neutral setting and to sustain a healthy labour market.” Her comments follow remarks by her Fed colleague Waller late last week, who also said he would be open to cutting rates at next month’s meeting. The market though remains unconvinced that the Fed will lower rates as soon as July, currently attaching little chance to such a move.
The Chair of the Fed, Jerome Powell, is due to deliver his semi-annual testimony on monetary policy to Congress later today. Ahead of his appearance, Trump is again applying pressure on him to cut interest rates, reiterating that they should be “two to three (percentage) points” lower than the current level of just over 4%. Meanwhile, on the economic data front, the main releases of note today are the IFO business confidence index for June in Germany and the Conference Board consumer confidence index, also for June, in the US.