Dollar hits near 4-year low versus euro, weighed by worries over tax bill, trade deal

NEW YORK – The dollar hit a near four-year low against the euro on Monday amid worries over the rising US government deficit and uncertainty surrounding trade deals with major countries.

Senate Republicans will try to pass President Donald Trump’s sweeping tax-cut and spending bill, despite divisions within the party about its expected USD 3.3 trillion hit to the nation’s debt pile.

The dollar dropped 0.63% to 0.79355 against the Swiss franc, on track to end the month down 3.60%. The greenback has lost about 12.5% against the Swissie this year.

The euro hit its highest against the dollar since September 2021 at USD 1.1780. It was last up 0.45% and set to gain about 3.8% for the month. The single currency has gained about 14% against the dollar this year.

“There’s a lot of focus around the big, huge bill and whether that gets approved,” said Amo Sahota, executive director at FX consulting firm Klarity FX in San Francisco. “The dollar has been on a weakening trend. We are halfway through the year and the big winners have been the stocky (Swedish krona), the Swiss franc, and the euro. The euro’s fortunes turned after the euro zone announced a huge spending bill.”

The EU is open to accepting a trade agreement with the US that would apply a universal 10% tariff on many of its exports, Bloomberg News reported on Monday.

Treasury Secretary Scott Bessent said that countries could still face sharply higher tariffs on July 9 even if they are negotiating in good faith, adding that any potential extensions will be up to Trump.

The US and China had resolved issues around shipments of Chinese rare earth minerals and magnets to the United States, further modifying a May deal in Geneva, Bessent had said last week.

“You have a weak dollar due to a potentially large increase in our budget deficit, and you have continued uncertainty around these tariff deals,” said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey.

“We had this positive news from the EU for a little bit and we had potential positive deals coming up, but then you had Trump doing a temporary about-face on Friday on Canada and so forth,” Epstein said.

Trump said Japan would be among countries to receive a trade letter outlining tariffs they would need to pay to the US

The dollar was down 0.36% to 144.45 against the Japanese yen, on track to finish the month flat versus the Asian currency.

Canada halted its plans to begin collecting a new digital services tax targeting US technology firms just hours before it was due to start on Monday in a bid to advance stalled trade negotiations with Washington.

The Canadian dollar strengthened against the US currency on the session. It was set to notch its fifth straight month of gains against the greenback. The loonie was up 0.41% versus the greenback to C$ 1.353 per dollar.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.35% to 96.86, on track for its sixth straight month of losses. It is set to mark its worst half-year since the 1970s.

“It’s kind of rotating a game of musical chairs, whether it’s the ‘big beautiful bill’, the trade deals, and then the Iran-Israel conflict. It’s all like taking turns to be at center stage; once one thing passes and the other thing is focused on,” Epstein said.

The Swedish krona strengthened 0.48% versus the dollar to 9.462. Sterling strengthened 0.04% to USD 1.3719. It is up 2% in June.

(Reporting by Chibuike Oguh in New York. Additional reporting by Kevin Buckland and Johann M Cherian. Editing by Mark Potter and Marguerita Choy)

Oil falls on prospect of more OPEC+ supply, easing risks in Mideast

SINGAPORE – Oil prices fell 1% on Monday as an easing of geopolitical risks in the Middle East and the prospect of another OPEC+ output hike in August boosted the supply outlook.

Brent crude futures fell 66 cents, or 0.97%, to USD 67.11 a barrel by 0031 GMT, ahead of the August contract’s expiry later on Monday. The more active September contract was at USD 65.97, down 83 cents.

US West Texas Intermediate crude dropped 94 cents, or 1.43%, to USD 64.58 a barrel.

Last week, both benchmarks posted their biggest weekly decline since March 2023, but they are set to finish higher in June with a second consecutive monthly gain of more than 5%.

A 12-day war that started with Israel targeting Iran’s nuclear facilities on June 13 caused Brent prices to surge above USD 80 a barrel after the US bombed Iran’s nuclear facilities and then slump to USD 67 after President Donald Trump announced an Iran-Israel ceasefire.

The market has stripped out most of the geopolitical risk premium built into the price following the Iran-Israel ceasefire, IG markets analyst Tony Sycamore said in a note.

Further weighing on the market, four delegates from OPEC+, which includes allies of the Organization of the Petroleum Exporting Countries, said the group was set to boost production by 411,000 barrels per day in August, following similar-size output increases for May, June and July.

OPEC+ is set to meet on July 6 and this would be the fifth monthly increase since the group started unwinding production cuts in April.

In the U.S., the number of operating oil rigs, an indicator of future output, fell by six to 432 last week, the lowest level since October 2021, Baker Hughes said.

(Reporting by Florence Tan; Editing by Sonali Paul)

UK watchdog to ease rules on investment advice

LONDON – Britain’s financial regulator said on Monday it will make it easier for investment firms to give customers support with their pensions and investments, a move broadly welcomed by finance firms who had complained about the current strict rule book.

Under existing rules investment firms are restricted in how much support they can give customers outside of more highly regulated financial advice. This created an “advice gap” for those unable to afford the regulated advice, firms had said.

The Financial Conduct Authority (FCA) plans to create a new category of help for consumers called “targeted support” allowing firms to make suggestions to certain groups such as those not saving enough for retirement or holding excess cash.

The FCA said it also planned to ease rules for simplified advice, but added that there would remain a place in the industry for full financial advice. The watchdog will consult on the proposed changes before introducing them next year.

“We want to help consumers navigate their financial lives and plan for the long term,” said Sarah Pritchard, deputy chief executive of the FCA. “Some of the most difficult financial decisions we face are how to save, invest and prepare for a comfortable retirement.”

Investment firms welcomed the proposals but said the new rules had to be clearly defined and any potential penalties properly understood.

“The advice gap has been acknowledged for years, but never properly addressed. The FCA has great ambitions, and this seems like the best chance in a generation to tackle the problem,” said Verona Kenny, chief distribution officer at Aberdeen Adviser.

(Reporting by Iain Withers; Editing by Hugh Lawson)

Oil market reflects slim chance of supply disruption, Goldman analysts say

Options markets suggest the probability of a disruption of oil flows through the Strait of Hormuz is just 4% following the Iran-Israel ceasefire, Goldman Sachs analysts said in a note on Thursday.

Fears that Iran could close the Strait of Hormuz after U.S. strikes on its nuclear facilities sent Brent crude futures to a high of USD 81.40 on Monday, but concerns eased in the wake of the truce declared the next day, sending crude back below USD 68.

The sharp drop in the geopolitical risk premium likely reflected traders’ recent experiences with major geopolitical shocks without significant oil disruptions, Iran’s restrained response, strong U.S. and China incentives to avoid large disruptions, and the likely shift to large inventory builds from the fall, Goldman analysts said.

Options markets see a 60% chance that Brent will stay in the USD 60s in three months and a 28% probability they would exceed USD 70, Goldman analysts said.

Were oil flows to be disrupted through the Strait of Hormuz, Brent would climb to USD 90 a barrel, they said.

(Reporting by Anjana Anil in Bengaluru; Editing by Himani Sarkar and Sonali Paul)

Dollar drops to lowest since 2021 against euro, sterling

NEW YORK – The dollar hit a three-and-a-half-year low against the euro and sterling on Thursday in a broad selloff as traders priced in the likelihood that the Federal Reserve will cut rates more than previously expected.

“This week it’s definitely been about the Fed, the prospect of easing sooner and potentially more rate cuts,” said Eric Theoret, FX strategist at Scotiabank in Toronto.

Fed Chair Jerome Powell was interpreted as being more dovish this week in testimony to US Congress. He repeated expectations that inflation should rise this summer, but said that if price pressure remains contained “we will get to a place where we cut rates sooner than later.”

“Powell kind of opened the door to potentially a July cut,” said Noel Dixon, global macro strategist at State Street Global Markets. If the next consumer price inflation release is below market expectations, “I think markets will start to price in the probability of a cut to July.”

Fed funds futures traders are pricing in 23% odds of a July cut, up from 13% a week ago, while a cut by September has a 93% probability, according to the CME Group’s FedWatch Tool. In total, traders see 66 basis points of cuts by year-end, indicating a potential third 25-basis point reduction, up from 46 basis points on Friday.

US President Donald Trump will nominate a new Fed Chair next year who is expected to be more dovish than Powell, whose term will end in May.

Trump on Wednesday called Powell “terrible” and said he has three or four people in mind as contenders for the top Fed job. The Wall Street Journal reported on Wednesday that Trump has toyed with the idea of selecting and announcing Powell’s replacement by September or October.

Analysts say that person could operate as a shadow Fed chair, undermining Powell’s influence.

Dixon said that a shadow Fed Chair could be a problem if inflation reaccelerates and seems to be persistent “because the message there would be that they would discount the inflation.”

Chicago Fed President Austan Goolsbee said on Thursday that any move to name a replacement for Powell would have
no influence
on monetary policy while the nominee awaited confirmation.

The euro was last up 0.51% at USD1.1719 and reached USD1.1744, the highest since September 2021. Sterling rose 0.62% to USD1.3748 and got as high as USD1.3770, its highest since October 2021.

The Swiss franc hit a 10-1/2-year high at 0.799 per dollar.

The dollar fell 0.72% to 144.2 Japanese yen.

Investors are also focused on the Trump administration’s self-imposed July 9 deadline to negotiate deals that avoid reciprocal tariffs with trading partners.

US Congress is also working on a tax and spending bill which the Senate is aiming to pass by July 4.

The dollar could get a boost if fiscal stimulus from the bill boosts growth and reduces the deficit as a percentage of gross domestic product, said Dixon.

Until then, the budget and current account deficits are negative for the dollar, he said.

Longer-term the dollar is also under pressure as international investors reallocate away from US assets on concerns about the outlook for the economy and the US currency.

“The result of US asset outperformance over the past decade is you’ve got a lot of asset managers that are long the US dollar way more than I think they’re comfortable,” said Theoret.

In cryptocurrencies, bitcoin fell 0.43% to USD107,382.

(Reporting by Karen Brettell; Additional reporting by Linda Pasquini in Gdansk; Editing by Alex Richardson and Diane Craft)

Oil rebounds on signs of strong US demand

NEW YORK – Oil prices rose nearly 1% on Wednesday, recovering from a sharp slide early this week, as data showed relatively strong US demand, and as investors assessed the stability of a ceasefire between Iran and Israel.

Brent crude futures settled 54 cents higher, or 0.8%, at USD 67.68 a barrel, while US West Texas Intermediate crude (WTI) ended up 55 cents, or 0.9%, at USD 64.92, both paring some of the 13% losses made earlier in the week.

After US President Donald Trump announced the ceasefire on Tuesday, Brent settled at its lowest since June 10, and WTI ended at its lowest since June 5 on the reduced Middle East supply risk.

Oil prices had rallied after June 13, when Israel launched a surprise attack on key Iranian military and nuclear facilities. Prices hit five-month highs after the US attacked Iran’s nuclear facilities over the weekend.

“While concerns regarding Middle Eastern supply have diminished for now, they have not entirely disappeared, and there remains a stronger demand for immediate supply,” said ING analysts in a client note.

Prices found support from Wednesday’s government data that showed US crude, gasoline, and distillate inventories fell last week.

Crude inventories dropped by 5.8 million barrels, data showed, compared with analysts’ expectations in a Reuters poll for a 797,000-barrel draw.

Gasoline stocks unexpectedly fell by 2.1 million barrels, compared with forecasts for a 381,000-barrel build as gasoline supplied, a proxy for demand, rose to its highest since December 2021.

“We are looking at big draws across the board,” said Phil Flynn, senior analyst with the Price Futures Group. “This type of report can refocus on US supply and demand, and less on geopolitics.”

A slew of US macroeconomic data released overnight, including data on consumer confidence, showed possibly weaker-than-expected economic growth in the world’s largest oil consumer, bolstering expectations of a Federal Reserve rate cut this year.

Oil prices will likely consolidate at around USD 65-70 per barrel levels as traders look to more US macroeconomic data this week and the Fed rate decision, said independent market analyst Tina Teng.

The market is betting that the Fed could cut US interest rates as soon as September, which would typically spur economic growth and demand for oil.

(Reporting by Stephanie Kelly; Additional reporting by Anna Hirtenstein and Trixie Yap; Editing by Marguerita Choy, David Gregorio, and Cynthia Osterman)

US yields ease as markets consider rate cut timing, tepid auction demand

NEW YORK – Yields on benchmark US Treasuries were slightly lower on Wednesday afternoon, as oil prices rose and markets assessed the timing of potential interest rate cuts.

Yields on the longer-term Treasuries rose during the day, but receded in afternoon trading. The US 10-year Treasury note’s yield was down 0.6 basis point to 4.287%, and the 30-year bond yield was flat at 4.831%

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 1.1 basis point at 3.773%.

Oil prices rose on Wednesday after sharp declines over the last days. Investors considered strong US energy demand and assessed the stability of the truce in the Middle East.

Federal Reserve Chair Jerome Powell told a US Senate panel on Wednesday that tariff plans may well just cause a one-time jump in prices, but the risk it could cause more persistent inflation is large enough for the central bank to be careful in considering further rate cuts. Debate over the timing for the first rate cuts of the year has been growing since Fed officials appointed by President Donald Trump, such as Michelle Bowman and Christopher Waller, discussed the chance of rate cuts beginning as soon as July.

“Our base case scenario is still the first rate cut of the year in September, but we are closely following the discussions among Fed officials ahead of the July meeting and Jackson Hole Conference,” said Ed Acton, Citigroup’s US rates strategist.

Several Fed officials are expected to speak publicly on Thursday, such as Federal Reserve Bank of Richmond President Thomas Barkin, Cleveland’s Fed president Beth Hammack, board governor Michael Barr and Minneapolis’ Fed president Neel Kashkari.

CME’s FedWatch tool shows markets project a 22% chance of the first rate cut at the July meeting and 90% chance of cuts in September. Markets will be looking for signs of deceleration that could skew the odds to more urgent timing.

On Thursday, the Commerce Department will release the final estimate for first-quarter Gross Domestic Product. The Labor Department will also release initial unemployment claims.

The most important data will come on Friday, with the Personal Consumption Expenditure price index for May, said Gennadiy Goldberg, head of US rates strategy at TD Securities in New York. “Markets do not have now a lot of momentum in either direction right now, data may change that”, he added.

Trump said on Wednesday morning during a NATO meeting in the Netherlands he is already considering candidates to replace Powell next year when his term ends.

The US Treasury sold USD 70 billion in 5-year notes auction, with tepid demand and a 2.36 bid-to-cover ratio. Yields on the 5-year notes were flat in afternoon trading, at 3.842%.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 51.4 basis points.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.307% after closing at 2.3% on June 24.

The US dollar 5 years forward inflation-linked swap, seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed’s quantitative easing, was last at 2.471%.

(Reporting by Tatiana Bautzer, Editing by Nick Zieminski and Franklin Paul)

Gold holds steady as investors await US economic data

Gold prices were steady on Wednesday as market participants remained cautious ahead of key US economic data, while the ceasefire between Iran and Israel weighed on safe-haven demand.

Spot gold was up 0.1% at USD 3,327.91 per ounce at 0158 p.m. EDT (1758 GMT) after prices hit their lowest in over two weeks in the previous session.

US gold futures settled 0.3% lower at USD 3,343.1.

With all the momentum and potential in the markets, the factors that typically drive gold never pushed it to new highs, said Daniel Pavilonis, senior market strategist at RJO Futures

“So, I think the path is now more to the downside; it may hit USD 2,900 if things don’t escalate in the Middle East.”

US President Donald Trump revelled in the swift end to war between Iran and Israel, saying he now expected a relationship with Tehran that would preclude rebuilding its nuclear programme.

Wall Street’s S&P 500 and Nasdaq indexes rose on Wednesday, hovering near a record peak. .N

Federal Reserve Chair Jerome Powell, in his second day of congressional testimony, reiterated that the central bank doesn’t need to be in a rush to cut interest rates due to uncertainty over the impact of the still-unresolved tariff debate.

In May, Trump paused his sweeping trade tariffs until July 9 to allow Washington to negotiate compromises with multiple countries.

However, Powell added, “I think if it turns out that inflation pressures remain contained, we will get to a place where we cut rates sooner than later.”

The market currently sees an over 85% chance of a rate cut in September.

Bullion tends to do well during periods of uncertainty and in a low-interest-rate environment.

Traders are also awaiting US GDP and jobs data due on Thursday, and the Personal Consumption Expenditures (PCE) data on Friday to gauge the Fed’s future policy path.

Elsewhere, spot silver added 0.8% to USD 36.2, while palladium fell 0.5% to USD 1,061.01.

Platinum rose 2.8% to USD 1,352.96, reaching its highest level since September 2014.

(Reporting by Sarah Qureshi in Bengaluru; Editing by Tasim Zahid, Leroy Leo, and Maju Samuel)

US foreign investment slump – anomaly or warning?: McGeever

ORLANDO, Florida – Much of the ‘de-dollarization’ debate has focused on foreign exposure to US securities like stocks and bonds. But investors shouldn’t ignore foreign direct investment flows, the traditionally sticky capital that may also be sending out warning signals.

Foreign direct investment (FDI) typically involves an overseas entity acquiring the assets of a company in another country or increasing its holdings, often via the purchase of machinery, plants, or a controlling stake. FDI is therefore considered a longer-term investment compared to portfolio flows, which can be more volatile.

US President Donald Trump says he has attracted record foreign investment into the country. Indeed, the White House has a page on its website with a “non-comprehensive running list of new US-based investments” since Trump’s second term began. The running total is in the trillions of dollars and includes pledges from several foreign countries.

Included are more than USD 4 trillion in US-bound investments pledged by the United Arab Emirates, Qatar, Japan, and Saudi Arabia. During Trump’s trip to the Middle East last month, he said the US is on track to receive USD 12-USD 13 trillion of investments from countries around the globe, which includes “projects mostly announced … and some to be announced very shortly.”

These flows may emerge in full, in time. But official figures on Tuesday showed that FDI in the first quarter actually fell to USD 52.8 billion, the lowest total since the fourth quarter of 2022. That’s well below the quarterly averages of the past 10 and 20 years.

The Commerce Department figures also showed that the US current account deficit widened to a record USD 450.2 billion in the quarter, or 6% of US GDP, meaning FDI inflows barely covered 10% of that shortfall.

Should the Trump administration be worried?

TARIFF DISTORTIONS

The short answer is probably not, at least not yet.

FDI flows are typically far smaller than portfolio flows into equity and fixed income securities, so from the perspective of funding the current account deficit, the drop in FDI is not as pressing a concern.

On the other hand, if foreign investors are also buying fewer US securities, capital from elsewhere will be needed to fund that deficit.

Additionally, America’s balance of payments data in the first quarter was hugely distorted by domestic consumers and businesses front-running Trump’s tariffs, loading up on imports before the duties kick in later this year.

Trump’s bet is that the deficit will shrink this year and beyond as his ‘America First’ policies spur more “onshoring” from domestic firms as they bring production back home and the weakening dollar helps US manufacturing by making exports more competitive. The subsequent boom will attract investment from companies and governments overseas. In theory.

However, these dynamics work both ways.

For example, the European Union is by far the largest provider of US FDI, accounting for 45% of the total in 2023, according to Citi. The combination of the continent’s German-led fiscal splurge, US tariffs, and ‘de-dollarization’ concerns could easily crimp that flow, perhaps significantly.

Another potential risk to US-bound FDI is ‘Section 899′ – the possible tax of up to 20% on foreigners’ US income that could be part of Trump’s budget plans. A Tax Foundation report in May found that Section 899 would “hit inbound investment from countries that make up more than 80 percent of the US inbound FDI stock.”

Industry pushback may water down Section 899, but it remains a cloud on the US investment horizon.

The US is the world’s biggest recipient of FDI, with a 25% share of global volumes in 2023, up from around 15% before the pandemic, according to Citi. Its economy is the largest in the world, a thriving hub of innovation, pioneering technology, artificial intelligence and money-making potential.

That will always attract FDI. Whether it attracts as much in this new environment remains to be seen.

(By Jamie McGeever; Editing by Andrew Heavens)

Oil prices edge higher as investors assess Iran-Israel ceasefire

Oil prices edged higher on Wednesday, finding some respite after plummeting in the last two sessions, as investors assessed the stability of a ceasefire between Iran and Israel.

Brent crude futures rose 75 cents, or 1.1%, to USD 67.89 a barrel. US West Texas Intermediate (WTI) crude gained 71 cents, or 1.1%, to USD 65.08.

Brent settled on Tuesday at its lowest since June 10 and WTI since June 5, both before Israel launched a surprise attack on key Iranian military and nuclear facilities on June 13.

Prices had rallied to five-month highs after the US attacked Iran’s nuclear facilities over the weekend.

US airstrikes did not destroy Iran’s nuclear capability and only set it back by a few months, according to a preliminary US intelligence assessment, as a shaky ceasefire brokered by US President Donald Trump took hold between Iran and Israel.

Earlier on Tuesday, both Iran and Israel signaled that the air war between the two nations had ended, at least for now, after Trump publicly scolded them for violating a ceasefire.

As the two countries lifted civilian restrictions after 12 days of war – which the US joined with an attack on Iran’s uranium-enrichment facilities – each sought to claim victory.

Direct US involvement in the war had investors worried about the Strait of Hormuz, a narrow waterway between Iran and Oman, through which between 18 million and 19 million barrels per day (bpd) of crude oil and fuel flow, nearly a fifth of global consumption.

Investors awaited US government data on domestic crude and fuel stockpiles due on Wednesday. US crude fell by 4.23 million barrels in the week ended June 20, market sources said, citing American Petroleum Institute figures on Tuesday.

(Reporting by Stephanie Kelly; Editing by Christopher Cushing)

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