The dollar index (DXY) is down 0.13% as of today, with a corresponding increase of 1% in WTI crude oil prices heightening inflation expectations and impacting monetary policy considerations by the Federal Reserve. The swaps market is pricing in a 32% chance of a 25 basis point rate hike at the next FOMC meeting scheduled for July 28-29.
The euro (EUR/USD) has risen by 0.32%, buoyed by a weaker dollar and positive economic data showing Eurozone economic confidence increasing by 1.3 points to 95.0, surpassing expectations of 94.3. However, the Eurozone’s May M3 money supply growth of 3.2% year-over-year has raised concerns, exceeding projections of 2.7% year-over-year, while the likelihood of a 25 basis point rate hike by the European Central Bank (ECB) at their meeting on July 23 stands at 6%.
The Japanese yen (USD/JPY) is under pressure, recently falling to a 39-year low against the dollar, despite unexpected retail sales growth of 1.9% month-over-month in May. Following discussions between Japanese Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent about potential currency intervention, intervention risks are heightened as the yen remains above 160 per dollar, with a 1% chance of a 25 basis point rate hike by the Bank of Japan (BOJ) expected at their meeting on July 31.
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