Dollar sets new 2025 lows

While at first it seemed that Israel and Iran hadn’t got the Trump ceasefire memo, subsequent confirmation of a truce (however fragile) between the two sides, along with softer than expected US economic data, kept the dollar on the back foot during yesterday’s session. It fell to new 2025 lows against both the euro and sterling of circa $1.1640 and $1.3650 respectively, and is only marginally firmer this morning at around $1.1610 and $1.3620. EURGBP is a touch lower, though still fairly tightly range-bound, trading at about £0.8520.

European stocks held most of their early gains to finish around 1.5% higher yesterday, while the main US indices rose by 1% to 1.5% (and are now closing in on their all-time highs set earlier this year). US government bond yields fell by around 4-5bps, with the soft economic data contributing to the move lower. UK and German yields were flat to marginally higher on the day, though both are edging lower at the start of play today.

Consumer confidence in the US fell quite sharply in June according to the Conference Board’s measure – the market had expected a small increase – reversing a good portion of the bounce in sentiment seen in May. Consumers’ assessments of the present situation and their expectations for the future both contributed to the decline in confidence this month, with their appraisal of current labour market conditions weakening for a sixth month in a row.

In his testimony to Congress yesterday, Fed Chair Powell did nothing to encourage the notion that the central bank would cut interest rates as soon as next month’s monetary policy meeting. He reiterated that “for the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.” He again noted that, while the effects of Trump’s trade policy remain uncertain, increased tariffs are likely to push up inflation and weigh on economic activity.

Looking to the day ahead, it’s very quiet on the economic data front with only new home sales and building permits due in the US. Powell returns to Congress for a second day of testimony, though he’s very unlikely to have anything new to say.