Dollar Steadies After Hitting Multiyear ⁣Lows Amid Trade⁢ Deal⁣ Hopes

Updated June 27, 2025

The dollar (primary_keyword) stabilized today after a sharp decline that saw it reach multiyear lows ‍against the euro and the British pound, and a 10-year low against the yen. A more positive news flow, including potential trade deals‍ and confirmation of an agreement with China, is providing some support.

The U.S. secured an ⁢exemption‍ from the Organization for Economic cooperation and Progress’s (OECD) Pillar 2 corporate tax‍ reform,‍ and a proposed “revenge ‍tax” ‍under Section 899 of the budget is expected to be dropped. Discussions are underway to potentially extend the postponement of reciprocal tariffs beyond the current July 9 deadline. While the dollar (primary_keyword) has shown resilience,⁤ it remains⁣ near yesterday’s lows.

Equity ‍markets reacted favorably. Most Asia-Pacific markets saw gains,with⁤ Japanese indexes rising by more than ⁣1%.China, Hong Kong, South Korea, and Australia were exceptions. European stocks are up nearly 1%, potentially marking the first back-to-back advance in three weeks. U.S. index futures are up between 0.2% and 0.3%.Benchmark government bonds are also firmer.

A two⁢ basis point increase put the 2-year Treasury yield at a new weekly high near 1.43%. European⁣ yields are mostly up less than one basis point,but enough to push the German 10-year yield to a new weekly high of approximately 2.57%. The 10-year Treasury yield is up about three basis points at 4.27%, down nearly 8 basis points ‍for the⁤ week. Gold (secondary_keyword_2) has fallen to a new weekly low near $3,282, also a new low for the month. august ‍crude oil continues to trade within Tuesday’s range of $64 to ⁢$67.85.

Despite the U.S.-China deal, othre‍ potential trade agreements, and the likely removal of the “revenge⁤ tax,” the⁢ dollar (primary_keyword) has struggled to gain meaningful⁢ traction. The U.S. Dollar Index (DXY) is hovering near a three-year low around⁢ 97.00, fluctuating slightly but remaining close to its lows in late european morning trading.

Attention is focused on today’s ⁢Personal Consumption Expenditures (PCE) data, but economists have a good understanding of it following the release of‍ durable goods orders and personal income figures earlier this month. The Federal Reserve targets the headline PCE, although some journalists emphasize the core rate.⁣ Both headline and core measures are expected ‍to rise by 0.1%, pushing year-over-year rates to 2.3% and 2.6%, respectively. ‍A key factor is the slowing of consumption, with first-quarter consumption growth‍ revised down to 0.5% from 1.2%.

Monthly personal consumption rose by 0.2% in April, and the median forecast in a Bloomberg survey anticipates a 0.1% gain for May. This follows declining consumer confidence, rising household debt, and slower job growth. Adjusted for inflation, real consumption growth through May is ⁤half the pace of the‍ first five months of 2024.

Ahead of the data, the fed funds futures market indicates about a 21% chance of a rate cut in July. This is up from around⁣ 16% a week ago. At the ⁣end of May, before comments from Federal reserve Governors Christopher Waller and Michelle Bowman, and President Donald Trump’s criticism of Federal Reserve Chairman ⁢Jerome Powell, the market was pricing in a 28% chance of a July cut.

Talk⁤ of option-related demand may have contributed to the euro’s surge past $1.17 yesterday. The Depository Trust & Clearing Corporation (DTCC) showed ⁤nearly six ⁤billion euros in options expiring between yesterday and July 1. The euro peaked in early European trading near $1.1745, approaching that ⁣level again in the New York afternoon but stalling. Today, it has traded mostly within a 20-tick range around $1.17. A break of $1.1680 could⁤ prompt short-term momentum traders to exit, potentially sending the euro back to the $1.1650 area,⁢ were 2.1 billion euros in options expire Monday. Prior to today, the euro had not fallen as June 16, its longest advance in nearly a year.

France and Spain ‍reported June Consumer Price Index (CPI) figures ahead of next week’s eurozone estimate. France’s ‍harmonized CPI rose by 0.4%, double expectations, increasing the year-over-year rate to 0.8% from 0.6%. Spain’s CPI rose by 0.6%, with the year-over-year rate increasing to 2.2% from 2.4%. The eurozone’s June CPI is expected to increase by 0.2%, maintaining an unchanged year-over-year rate of ‍1.9%.

The dollar (primary_keyword) fell to a new yearly low against the Chinese yuan (CNH7.1525) yesterday,recovering‍ slightly above⁤ CNH7.17 in early European trading. it has steadied today,⁤ trading within yesterday’s range. The People’s Bank of China (PBOC) set the⁤ dollar’s reference rate at CNY7.1627.

The Hong Kong Monetary Authority’s (HKMA) intervention to defend the peg may⁣ have reduced‍ upside pressure on the yuan‍ by ⁣discouraging short Hong Kong⁢ dollar/long yuan positions. China reported a 1.1% decline in industrial ‍profits for the first five months of the year compared to the same period in‍ 2024.

China confirmed the trade agreement with the U.S. The lifting of some U.S. sanctions and the resumption of ethane⁣ supply⁤ will occur after⁣ rare earth and magnet ⁢shipments begin, ⁢according to reports.

The ⁣dollar (primary_keyword) fell from almost JPY146 on wednesday to JPY143.75 yesterday,driven by general dollar weakness and declining U.S. rates. It settled below the ⁤20-day moving average (approximately JPY144.55) for⁣ the first time in two weeks and is trading quietly today in⁤ the narrowest range of the week (JPY144.20-JPY144.80).

Tokyo⁢ price pressures eased slightly more than expected this month. The headline CPI rose 3.1%⁢ year-over-year,⁣ compared to 3.4%⁣ in May. The core measure, excluding ‍fresh food, eased to 3.1% from 3.6%. Excluding fresh food and energy, Tokyo’s CPI also slipped to 3.1% from 3.3%.

This trend is expected to be ‍largely mirrored at the national level. ‍The swaps market indicates negligible chances of a rate ⁢hike at the ⁤end ⁢of the july central bank meeting. Some surveys suggest a potential rate hike may be pushed into 2026. Japan also reported May retail sales,which unexpectedly fell (-0.2%) ⁤compared to expectations of a 0.3% increase, following a 0.7% rise in April. Japanese consumption has been more stable ‍than government spending and private investment. The Japanese economy contracted by 0.2% at an annualized pace in the first ‍quarter and appears to have⁢ performed only slightly better ‍in the second quarter. Japan’s unemployment rate remained steady in May at 2.5%, but the job-to-applicant ratio declined to 1.24 from 1.26, matching the⁢ lowest level since early 2022.

Sterling’s four-day advance is being ‍tested. ⁤it rallied four cents from Monday’s low, approaching $1.3370. It settled above the upper Bollinger Band⁤ yesterday⁢ (approximately $1.3725 today). Above yesterday’s ⁢$1.3770, $1.3840 could be the next target. It did not trade below $1.3700 in North⁣ America yesterday, where GBP560 million in options expired. It is trading mostly between $1.3720 and $1.3750 so far today. A break of $1.3700 could trigger position adjustments, potentially taking sterling to $1.3650 and ‍better support.

The Canadian dollar’s 0.7% gain yesterday ‍was the largest this month. The U.S. dollar was turned back from almost CAD1.38 on Monday and⁢ slipped below CAD1.3620 yesterday.It is indeed holding ‍above CAD1.3625 today and has been capped near CAD1.3650. Options for $875 million expire at CAD1.3600 today. This year’s low was recorded on june 16 near CAD1.3540. Despite the Canadian dollar’s gains, it is a laggard.⁤ The only G10 currency ‍to perform worse this month is⁤ the yen, which has fallen by ‍about 0.2%, while the Canadian dollar has risen by ‍around 0.7%. Year-to-date, it is up 5.4%, the least of the G10. The Australian dollar is a close second, appreciating by almost ⁣5.8%.

The ‍Australian dollar reached a seven-month high yesterday, almost $0.6565,‍ culminating a four-day rally. It surged 3%‍ from Monday’s one-month low ⁢(approximately $0.6375) to the new high yesterday. It frayed its upper Bollinger Band, found near $0.6550 today.A break of ⁤$0.6540 could ⁣see $0.6520. yesterday’s low was near $0.6500.

The aussie’s rally does not reflect a change in view on monetary policy. The futures market is the most confident‍ of a rate cut at the July 8 meeting (approximately 95%). Moreover,the market has been increasing the magnitude of this year’s rate cut for the past five‍ sessions,now anticipating 81 basis points of cuts between now and the end of‍ the year,up from 74 basis points a week ago.

The Mexican peso ‍took yesterday’s anticipated rate cut in stride. As widely expected,Banco de México (banxico)⁣ delivered its fourth consecutive 50 basis point rate cut.The central bank has not finished the ⁤easing cycle but signaled a more moderate pace going forward. It has cut the overnight rate target by 200 basis points this year, and inflation is above the 2-4% target range, ⁤even if it does not ‍appear to be accelerating.

Yesterday’s session low for the dollar (primary_keyword) was recorded in the European morning near MXN18.85. It reached a⁤ low after the rate ⁤cut of slightly below MXN18.86. Today, the greenback is in a roughly MXN18.86-MXN18.8950 range. The range may be ‍extended a little to the upside today, but peso buying does not appear fatigued.

What’s next

Traders will be closely watching upcoming economic data releases and Federal Reserve communications for further clues about the direction of monetary policy and the potential impact on the dollar (primary_keyword),⁣ euro (secondary_keyword_1), and other major currencies.