US dollar extends losses to five-week trough on US debt concerns
The US dollar fell in European trade on Monday against a basket of major rivals, hitting a five-week trough amid concerns about the US debt levels.
Now investors await important remarks by several Fed officials as they look for more clues on the odds of multiple Fed rate cuts this year.
The Index
The dollar index fell 0.4% to 98.69, the lowest since April 22, with a session-high at 99.16.
The index lost 0.8% on Friday, the fourth loss in five days amid a heavy selloff wave.
The index gave up 1.9% last week, the first weekly loss in five weeks, and the heftiest in six weeks on US financial stability concerns.
US Debt
US President Donald Trump said on Sunday that his tax reform bill will likely undergo big changes in the Senate.
According to the Congressional Budget Office, the bill will add $3.8 trillion to the government’s $36.2 trillion debt pile in the next ten years.
The huge US debt burden is back in the spotlight after Moody’s US credit rating downgrade last week and weak demand on government notes.
US Rates
According to the Fedwatch tool, the odds of a June 0.25% interest rate cut by the Federal Reserve stood at just 6%.
The odds of a July rate cut stood at 25%.
Markets now expect 50 basis points of total rate cuts by the end of the year, starting October.
Gold gives up two-week high on profit-taking
Gold prices fell in European trade on Monday away from two-week highs on profit-taking as haven demand slowed down while US President Donald Trump delayed tariffs on the EU.
The losses are contained as the US dollar slid to five-week lows against a basket of major rivals, with traders awaiting more clues on the path ahead for Fed interest rates.
The Price
Gold prices fell 0.8% today to $3331 an ounce, with a session-high at $3357.
On Friday, gold rose 1.9%, the fourth profit in five days, hitting a two-week high at $3365 after Trump’s tariff threats against the EU and Apple.
Gold rose 4.8% last week, the second weekly profit in three weeks, and the largest since early April.
Trade Developments
US President Donald Trump gave the EU an extended truce towards July 9 to reach a trade deal, backing off from an earlier threat to raise tariffs by 50% starting June 1.
Trump announced his decision to the journalists on Sunday after a phone call with the European Commission President Ursula von der Leyen, who asked for more time to reach an agreement.
US Dollar
The dollar index fell 0.4% on Monday to a five-week trough at 98.69 against a basket of major rivals.
The dollar is still hurt by concerns about US financial stability on speculation that Trump’s new tax reform bill will add $4 trillion to the US debt pile.
US Rates
According to the Fedwatch tool, the odds of a June 0.25% interest rate cut by the Federal Reserve stood at just 6%.
The odds of a July rate cut stood at 25%.
Markets now expect 50 basis points of total rate cuts by the end of the year, starting October.
SPDR
Gold holdings at the SPDR Gold Trust fell 1.43 tons on Friday to a total of 922.46 tons.
Euro hits four-week high before Lagarde's remarks
The euro rose in European trade on Monday against a basket of major rivals, extending gains for the second straight session against the dollar and hitting a four-week high as US President Donald Trump gave the EU another chance to reach a trade deal.
Recent eurozone inflation data led to divisions between European Central Bank policymakers on the decision to cut rates in June, with investors awaiting more data and a speech by ECB President Lagarde later today to gather more clues.
The Price
The EUR/USD price rose 0.5% to $1.1419, the highest since April 29, with a session-low at $1.1359.
The euro rose 0.7% on Friday against the dollar, the fourth profit in five days amid a strong sell wave.
The euro rallied 1.8% last week against the dollar, the first weekly profit in five weeks on concerns about US financial stability.
Trade Developments
US President Donald Trump gave the EU an extended truce towards July 9 to reach a trade deal, backing off from an earlier threat to raise tariffs by 50% starting June 1.
Trump announced his decision to the journalists on Sunday after a phone call with the European Commission President Ursula von der Leyen, who asked for more time to reach an agreement.
European Rates
Recent eurozone data showed inflation rose past estimates in April, renewing pressures on the European Central Bank’s policymakers.
Following the data, the odds of an ECB rate cut in June fell from 60% to 50%.
Now investors await a batch of important Eurozone data and speeches by ECB officials this week.
Japanese yen expands gains to four-week high in a strong start
The Japanese yen rose in Asian trade on Monday against a basket of major rivals, expanding gains for the second straight session against the dollar and hitting a four-week high on haven demand amid concerns about US debt levels following Trump’s tax reform bill.
The gains are boosted as well by increasing inflationary pressures on Bank of Japan’s policymakers, which boosted the odds of a rate hike in June.
The Price
The USD/JPY fell 0.25% today to 142.22 yen per dollar, the lowest since April 30, with a session-high at 143.08.
The yen rose 1% on Friday on the dollar, the eighth profit in nine days on haven demand as Trump threatened the EU and Apple with new tariffs.
The yen also rose 2.1% last week against the dollar, marking the first weekly profit in five weeks, and the largest in a month and a half on growing concerns about US financial stability.
US Debt Levels
US President Donald Trump said on Sunday that his tax reform bill will likely undergo big changes in the Senate.
According to the Congressional Budget Office, the bill will add $3.8 trillion to the government’s $36.2 trillion debt pile in the next ten years.
The huge US debt burden is back in the spotlight after Moody’s US credit rating downgrade last week and weak demand on government notes.
Japanese Rates
Earlier Japanese data showed consumer prices rose 3.5% in April, the highest pace since early y023, beating estimates of 3.4%, and up from 3.2% in March.
Following the data, the odds of a Japanese 0.25% interest rate hike in June rose from 30% to 40%.
Bank of Japan Deputy Governor Shinichi Uchida said the bank will continue to raise interest rates if the economy recovers from the negative impact of US tariffs, however he still cautioned that the economic outlook remains highly uncertain.
Now traders await important Japanese data on inflation, unemployment, and wages to gather more clues.