Dollar Falls After Soft US CPI as Peers Rise
A Bloomberg gauge of the dollar traded lower against all Group-of-10 peers after a soft CPI print. Following a temporary US-China trade truce, investors bought risk-on currencies sensitive to China’s outlook during the Asia trading session, with Sweden’s krona and Norway’s krone leading gains in Europe.
The Bloomberg Dollar Spot Index fell 0.7% after the CPI print; the gauge clawed back some of its gains on Monday spurred by a de-escalation of trade tensions between US and China; options flows show traders are unconvinced that strength will be long lasting
The 90-day postponement of the latest US-China tariffs “expires in August just following the FOMC meeting at the end of July,” wrote MUFG analyst Derek Halpenny in a note. “So this announcement makes a July rate cut less likely, pushing back further the potential timing of a cut”
Several major banks have reduced their 2025 rate cut predictions since the pause was announced
The US CPI rose less than forecasted
“Still no discernible impact from the tariffs,” Win Thin, a strategist at Brown Brothers Harriman, said about the CPI report. “That said, the Fed is on hold for the foreseeable future.”
10-year Treasury yields rose 3bps to 4.50%, reversing an earlier post-CPI 3bps fall to 4.1%
EUR/USD rose 0.9% to 1.1186; sizable expiries Tuesday seen at 1.1145-50 in €1.39b: DTCC
Germany’s ZEW investor expectations rose more than economists forecast in May
US Treasury Secretary Scott Bessent said the European Union suffers from a “collective action problem” that’s hampering trade negotiations, downplaying the possibility of a quick agreement with the US’s largest trading relationship
“The EUR bull-run has run its course as investors start to reassess the impact of a potential further escalation of trade tensions between the US and the EU,” said Credit Agricole strategist David Forrester. “Expectations of aggressive repatriation into the Eurozone stock markets are still to materialize in full, in part because of growth worries on the continent that linger despite the prospects for aggressive fiscal stimulus in the medium-to-long term.”
GBP/USD rose nearly 1% to 1.3303
Data showed the UK labour market is cooling, with vacancies falling and wage growth slowing
USD/JPY fell 0.7% to 147.49 after advancing 2.1% on Monday
The yen advanced on demand from leveraged accounts booking short-term gains and as Treasury yields slipped after Monday’s spike, according to Asia-based FX traders
The pair was also sold after release of the Bank of Japan’s summary of opinions and Bank of Japan Deputy Governor Shinichi Uchida comments
USD/CHF dropped 0.7% to 0.8401
AUD/USD gained 1.7% to 0.6478, helped in part by dip buying exporters, according to a trader
NZD/USD rose 1.5% to 0.5942
The Aussie and kiwi were the best performing Group-of-10 currencies against the dollar
USD/CAD fell 0.3% to 1.3939
The loonie was the worst performing Group-of-10 currency against the dollar
Source : Bloomberg
