The dollar index (DXY) rose by 0.04% amid concerns that U.S. trade policy, particularly increased tariffs, could boost inflation and hinder Federal Reserve interest rate cuts. As of now, the markets are pricing a 7% chance of a 25 basis point rate cut at the upcoming FOMC meeting on July 29-30.
President Trump reaffirmed his commitment to maintaining high tariffs and indicated that no extensions would be granted on tariffs set to take effect on August 1, while also planning a 10% tariff on Indian goods due to their participation in BRICS. Simultaneously, the euro weakened by 0.05% due to a stronger dollar and declining German bund yields, with the ECB’s next meeting on July 24 showing a 3% chance of a rate cut.
In Japan, the yen dropped by 0.15% despite recovering from a two-week low after Japan’s 10-year JGB bond yield climbed to 1.51%. June machine tool orders fell by 0.5% year-over-year, the most significant drop in nine months, raising concerns ahead of the upper house election on July 20.
