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The dollar index (DXY) rose by 0.22% on Friday due to positive trade news as the U.S. approaches new trade deals with China and other partners. This came after the U.S. May core PCE price index increased by 0.2% m/m and 2.7% y/y, surpassing expectations, while consumer sentiment rose slightly to 60.7 in June. However, gains were limited by weaker-than-expected personal spending and income reports, which fell by 0.1% and 0.5% m/m, respectively.
U.S. Commerce Secretary Lutnick announced finalized trade agreements with China, including commitments for rare earth materials, while President Trump ended trade talks with Canada and proposed new tariffs in response to its digital services tax. Market expectations indicate a 19% chance of a 25 bp rate cut at the upcoming FOMC meeting, and Fed President Kashkari anticipates two such cuts this year. Meanwhile, Japan’s May retail sales fell by 0.2% m/m, and the Tokyo CPI rose by only 3.1% y/y, dampening demand for the yen.
The Eurozone’s June economic confidence survey dropped unexpectedly to 94.0, and while French CPI rose by 0.8% y/y, it was offset by a strengthening dollar and trade tensions impacting the euro. Precious metals, including gold, fell sharply due to a stronger dollar and increased global bond yields, settling near a four-week low, although modest recovery was noted following President Trump’s tariff threats towards Canada.
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