 Dollar remains under broad pressure midweek and is currently the weakest performer among major currencies. While dovish signals from Fed Vice Chair Michelle Bowman and Governor Christopher Waller cracked open the door for a July rate cut, that narrative has cooled. Several other Fed officials have voiced caution, pushing back on the idea of imminent easing, and markets have since trimmed the probability of a July move to below 20%. Nonetheless, expectations for a September rate cut continue to gain momentum, with market pricing now showing an 85% chance, compared to around 65% a week ago. The key source of uncertainty remains the expiration of the 90-day reciprocal tariff truce with the US, set to end in early July. Without a breakthrough or de-escalation in trade talks, it’s hard to see the Fed moving as soon as July. September offers a more plausible window, and offers the Fed more flexibility to assess incoming data and policy developments. EU–US trade tensions remain unresolved. European Commission Executive Vice-President Stephane Sejourne warned that Europe would need to "retaliate and rebalance" if the US insists on an asymmetrical deal similar to its pact with the UK. Though talks have reportedly accelerated, time is tight, and the risk of escalation still looms large over markets...... |
