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)

Gulf ceasefire leaves market facing known unknowns

LONDON – When Donald Trump completed his trip to Saudi Arabia, Qatar and the United Arab Emirates in May, complete with trillion-dollar pledges of investment, the Middle East seemed on the path to stability. A month on, following a 12-day war between Israel and Iran, the US bombing of Iranian nuclear facilities, and a retaliatory missile attack by Tehran on Qatar, the question is whether the ceasefire arranged by the US president can revive the previous optimistic mood. There are too many known unknowns for that to be the case.

Oil traders are behaving as if everything is back to normal. Brent crude contracts for August delivery were trading at USD 69 a barrel early on Tuesday, where they were just before Israel attacked Iran on June 13. The subsequent price spike to USD 80 a barrel allowed for the possibility that Tehran might retaliate by disrupting the tankers carrying a fifth of global oil supply that pass by its southern coast. Tuesday’s post-ceasefire price plunge implies that risk has receded.

If Saturday’s US attacks on Iranian nuclear facilities destroyed any prospect of the country obtaining an atomic bomb, oil traders would be right to be relaxed. Coupled with the diminished powers of Iranian proxies like Hezbollah, the region would be tangibly safer than before. Yet it’s far from certain that the nuclear threat has been defused. Iran’s Supreme Leader Ayatollah Ali Khamenei remains in place, and the location and condition of Iran’s stocks of enriched uranium are unclear.

Iran also looks less stable. The Islamic Republic has lost a slew of senior military leaders, and Monday’s relatively ineffectual retaliatory strike on Qatar projected weakness more than strength. Iranian authorities have sped up the search for a replacement for the 86-year-old Khamenei, five insiders with knowledge of the discussions told Reuters, but the process to replace a leader in power since 1989 may not be smooth.

Meanwhile, it’s far from clear that Israel’s campaign is over. Military success will likely shore up Prime Minister Benjamin Netanyahu’s governing coalition. Yet while Netanyahu has declined to say explicitly he is seeking regime change in Iran, he has said it “could be a result” of Israeli attacks. On Tuesday morning, Iran and Israel both claimed the other had violated the terms of the truce.

Officials in Saudi, the UAE and Qatar also have scope to feel relatively optimistic. After all, even if Iran’s nuclear capabilities have not been “totally obliterated”, as Trump claimed, progress has probably been extensively delayed.

Yet those countries arguably had the same reassurance ten years ago when the United States and other leading countries signed the Joint Comprehensive Plan of Action to limit Iran’s nuclear plan. More recently, Trump had seemed on a path to restoring the agreement.

Instead, Middle Eastern countries now face a potentially unstable mix: a vengeful and chastened Iran, and an Israel that feels there is unfinished business. There is plenty of scope for future shocks.

CONTEXT NEWS

Israeli Defence Minister Israel Katz said on June 24 he had ordered the military to strike Tehran in response to what he said were missiles fired by Iran in a violation of a ceasefire announced hours earlier by US President Donald Trump.

However, Iran’s ISNA student news agency said reports that Iran had fired missiles at Israel after the ceasefire took effect were false.

Both Israel and Iran had confirmed the ceasefire after it was announced by Trump.

The pan-European STOXX 600 Index was up 1.4% at 542.6 points, as of 0708 GMT. Brent crude prices dropped to USD 67 a barrel in earlier trading but rose to trade at USD 69 a barrel as of 0850 GMT.

(Editing by Peter Thal Larsen; Production by Oliver Taslic)

Japan’s Nikkei rises after Trump announces Iran-Israel ceasefire

TOKYO – Japan’s Nikkei share average rose on Tuesday after US President Donald Trump said Iran and Israel agreed to a ceasefire, which boosted global investors’ risk appetite.

The Nikkei ended 1.14% higher at 38,790.56 after touching 38,990.11, its highest since mid-February. The broader Topix rose 0.73% to 2,781,35.

Trump late on Monday announced a complete ceasefire between Israel and Iran, potentially ending the 12-day war that saw millions flee Tehran and prompted fears of further escalation in the war-torn region.

“Following Trump’s announcement, the market turned to risk on,” said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

Technology stocks led gains on the Nikkei, with start-up investor SoftBank Group 9984.T jumping 5.58%. Chip-making equipment maker Tokyo Electron 8035.T rose 3.65%.

“But the yen’s gains against the US dollar capped the Nikkei’s gains,” Yasuda said.

The dollar fell after the news of the ceasefire, pushing the yen up 0.7% to 145.15. The yen fell to as low as 148 per dollar, its weakest in more than a month.

A stronger Japanese currency tends to hurt the shares of exporters as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.

Honda Motor lost 1.14%, while Nissan Motor slipped 2.55%.

Energy stocks fell as US crude futures tumbled, with Inpex falling 6.79% to be the worst percentage loser on the Nikkei. Oil refiner Idemitsu Kosan and Eneos Holdings slipped 2.09% and 1.96%, respectively.

Shipping firms also fell, with Kawasaki Kisen and Mitsui OSK Lines losing 1.3% and 1.42%, respectively.

Of more than 1,600 stocks trading on the Tokyo Stock Exchange’s prime market, 64% rose and 31% fell, with 4% trading flat.

(Reporting by Junko Fujita; Editing by Sonia Cheema, Sumana Nandy, and Mrigank Dhaniwala)

US bond market braces for surge in Treasury supply in second half

BOSTON – The bond market is bracing for up to USD 1 trillion of additional US Treasuries supply in the second half of the year once lawmakers address the looming debt ceiling problem, possibly permanently, top rates strategists said on Tuesday.

Any new issuance will likely be focused on shorter-dated debt, including bills.

With the flood of Treasuries, market participants are left to wonder: who is going to buy them all? Treasury issuance is meant to address the US government’s huge fiscal deficit.

President Donald Trump’s sweeping tax-cut and spending bill would lead to a larger-than-expected USD 2.8 trillion increase in the federal deficit over the decade, despite a boost to US economic output, the nonpartisan Congressional Budget Office projected.

The US Senate could vote on Friday on Republicans’ tax and spending measure, said Treasury Secretary Scott Bessent on Tuesday, and he was confident the House would then pass that version.

“We are just about to go through a level shift,” said Mark Cabana, head of US rates strategy at BoFA Securities, during a panel discussion on Tuesday at the Money Fund Symposium in Boston. “You’re going to see this big issuance clip and it’s coming within the next few months. You can debate exactly when they raise the debt limit, but the X-date is coming soon.”

Bessent had said that the so-called X-date when the government would exhaust remaining borrowing capacity under the federal debt ceiling would come sometime during the mid-to-late summer. When the debt ceiling is reached the Treasury is unable to increase borrowings, but if it is lifted or eliminated, the government can then issue more debt.

Cabana’s forecast is for new supply of Treasuries to hit USD 1 trillion by the end of the year. Gennadiy Goldberg, head of US rates strategy at TD Securities, also expects an increase of nearly USD 1 trillion in issuance this year, with about USD 700 billion supply in August and September.

A surge in Treasury supply could increase repurchase, or repo rates, which refer to the cost of borrowing short-term cash using Treasuries or other debt securities as collateral. Higher Treasury supply typically saturates the market with additional collateral, which can initially lower repo rates due to excess supply. However, if supply exceeds demand substantially, it may lead to higher repo rates as lenders demand more compensation for holding larger volumes of securities.

Goldberg thinks this year’s supply will be concentrated on the front end of the Treasury curve – the two-year to the seven-year sector.

“Our expectation is that the Treasury keeps issuance focused on the very front end of the curve in terms of coupons. We’re not expecting auction size increases until the middle to end of next year, so August or November of 2026, and we don’t expect any increases in the long end either,” Goldberg said.

“In fact, I wouldn’t be surprised if there are some decreases in size on the long end, but twos, threes, fives, sevens, that’s where the Treasury is going to really look to finance themselves, not 10s, not 20s, not 30s. So it’s really that and bills.”

Adding to Goldberg’s point, Ian Lyngen, head of US rates strategy at BMO Capital Markets, noted that the US Treasury has become so market-sensitive that it is willing to pull back on longer-term issuance if it leads to volatility in yields.

It is not just the Treasury Department that has been more cognizant of the market’s reaction, he said, but also Japan’s Ministry of Finance and the UK.

Money market funds, whose assets hit a record USD 7.4 trillion in June, are well-positioned to absorb part of that Treasury supply, the strategists said. However, there has been a modest shift recently away from Treasuries by these money funds and into private repo transactions because of the latter’s higher rates.

(Reporting by Gertrude Chavez-Dreyfuss in Boston; Editing by Alden Bentley and Matthew Lewis)

Dollar drops on Middle East optimism, euro highest since 2021

NEW YORK – The dollar fell on Tuesday and the euro rose to its highest level since October 2021 after a ceasefire between Iran and Israel was announced, even as Federal Reserve Chair Jerome Powell repeated that he expects inflation to begin rising this summer.

The ceasefire began to take hold on Tuesday under pressure from US President Donald Trump, raising hopes for an end to the biggest ever military confrontation between the Middle East arch-foes.

“The market right now is unwinding the Middle East trade,” said Adam Button, chief currency analyst at ForexLive in Toronto.

The euro and yen gained as oil prices tumbled. The European Union and Japan rely heavily on imports of oil and liquefied natural gas, while the US is a net exporter.

The single currency was last up 0.38% at USD 1.162 after earlier reaching USD 1.1641. The dollar weakened 1% to 144.68 Japanese yen.

Risk-sensitive assets, including the Australian dollar, also gained on improving risk sentiment. The Aussie was last up 0.68% versus the greenback at USD 0.6503.

Sterling rose 0.77% to USD 1.3626 and reached USD 1.3648, the highest since January 2022.

The US currency fell even after Powell said in testimony before US Congress that he and many at the Fed expect inflation to start rising soon, and that the central bank was in no rush to ease borrowing costs in the meantime.

Traders were particularly attuned to his remarks after two other Fed policymakers indicated they support near-term rate cuts, citing concerns over the labor market and falling expectations about a resurgence in inflation.

“The market was looking for a strong pushback regarding the possibility of a rate cut, but Powell continues to sit on the fence,” said Button.

“The big debate at the Fed right now is in the jobs market. Waller and Bowman are saying they’re seeing signs of softness, whereas Powell said we don’t see weakness in the labor market,” Button said.

Fed Vice Chair for Supervision Michelle Bowman said Monday the time to cut interest rates appears imminent,t while Fed Governor Christopher Waller on Friday that the Fed should consider cutting interest rates at its next meeting.

US President Donald Trump said on Tuesday that interest rates in the country should be lowered by at least two to three percentage points.

Fed funds futures traders are pricing in 60 basis points of cuts this year, up from around 46 basis points before Waller’s comments on Friday. That indicates expectations that two 25-basis-point cuts are certain, with a rising chance of a third reduction.

A cut at the Fed’s July 29-30 meeting continues to be seen as very unlikely, with the first cut expected in September.

If the economy deteriorates and the Fed cuts interest rates faster than currently expected, that could be very negative for the dollar, said Vassili Serebriakov, an FX strategist at UBS in New York.

However, “if it doesn’t, if the Fed doesn’t cut until September and then delivers just two cuts this year, we’re probably looking at some dollar weakness, but it’s unlikely to be very significant, especially for pairs like dollar/yen, because the dollar still just benefits from carry quite a bit.”

Data on Tuesday showed that US consumer confidence unexpectedly deteriorated in June as households worried about business conditions and employment prospects over the next six months.

In cryptocurrencies, bitcoin gained 1.72% to USD 105,589.

(Reporting by Karen Brettell; Additional reporting by Stefano Rebaudo, editing by Deepa Babington)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Fed to cut just once

February Economic Update: Cut to the chase