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The dollar index (DXY00) dropped -0.61% on Wednesday, reaching a 1-week low. This decline was influenced by hawkish comments from ECB Governing Council member Holzmann, which helped the EUR/USD to rise +0.75% to a 1-week high. Additionally, expectations for a US Federal Reserve interest rate cut increased following weaker-than-expected payroll and PMI reports.
Minneapolis Fed President Neel Kashkari noted that “the economy is slowing,” suggesting a potential adjustment to lower federal funds rates. Current futures pricing suggests a 95% chance of a -25 basis point cut at the September 16-17 FOMC meeting. Furthermore, President Trump announced plans to double tariffs on US imports from India to 50% due to its purchases of Russian oil, which is projected to raise the average US tariff to 15.2%.
In economic indicators, Eurozone June retail sales increased +0.3% monthly, while German factory orders fell -1.0%, marking the largest decline in 5 months. The yen strengthened against the dollar by -0.37% following Japan’s June labor cash earnings, which rose +2.5% year-over-year, though below expectations.
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