Summary
- Canadian dollar drops to daily low versus U.S. dollar as Bank of Canada keeps interest rates steady.
- U.S. dollar climbs a fifth day before Federal Reserve policy announcement as the Japanese yen outperforms.
- U.K. pound sterling stays below one hundred day moving average toward oversold zone.
- U.S. Treasury yields modestly lower below 4.4% on the 10-year bond.
- U.S. Dollar Index rises to session high after ADP jobs data.
- U.S. consumer spending increased at a 1.4% pace but was offset by weaker business spending.
- Mexico’s peso weakens from stronger levels to above 18.70 from near 18.50 at the start of the week.
- India said to be evaluating implications of President Trump’s tariff statement of 25% tariffs, plus penalty for buying Russian goods.
- Australian dollar dips as Qtr./Qtr. core inflation unexpectedly slows.
- President Trump will make final call on China tariff truce, Treasury Secretary Bessent says.
- On Tuesday, JOLTs job opening data shows job openings fell to 7.44 million from 7.71 million.
- China’s yuan to appreciate to seven per dollar by March 2026: UBS Wealth.
Noteworthy
- U.S. Dollar Hits Five-Week High on Solid Data Before Fed
- U.S. 2nd Quarter GDP Rises Annualized 3.0% Qtr./Qtr.; Est. +2.6%
The U.S. dollar rose to more than a one-month high against a basket of currencies following stronger-than-expected U.S. data on economic growth and private payrolls.
The U.S. economy expanded at an annual rate of 3.0% in the second quarter. Economists had forecast between 2.3% and 2.6% growth.
The data comes ahead of a Federal Reserve’s monetary policy decision at 2:00 pm EST. where interest rates are expected to be left on hold.
As of this writing the dollar is holding at stronger levels as currency traders, and traders in general await the U.S. Federal Reserve’s policy decision. Gold rose ahead of the announcement.
Strong U.S. GDP likely “puts to bed the possibility of a rate cut from the Federal Reserve,” one analyst said in a note.
ADP also reported 104,000 jobs were created in the private sector in July, versus 64,000 expected.
The DXY dollar index rose to 99.57. The euro currency fell to a one-month low below $1.15, data shows.
President Trump is applying fresh pressure to U.S. trading partners, singling out India for its links to Moscow.
In a social media post early Wednesday, Trump said goods from India would face 25% tariffs, and the country would also be penalized for buying Russian arms and energy. The Indian rupee sank against the U.S. dollar.
More broadly, the president said he will not extend Friday’s deadline for higher tariffs to kick in on countries that have not secured deals—a group that includes Canada, Mexico, and South Korea.
Meanwhile, new data showed the U.S. economy grew at a 3% clip in April through June, rebounding after shrinking in the first quarter. Inflation pressures were also a little firmer than anticipated, helping boost Treasury yields and the U.S. dollar.
Trump said the growth readout was "way better than expected" and reiterated his call for rate cuts, ahead of the Federal Reserve's latest decision.
As previously indicated the Federal Reserve is expected to hold interest rates steady, with a statement due at 2 p.m. EST. Chair Jerome Powell's subsequent press conference could give insight into the central bank's openness to resuming cuts in September.
Many believe the euro currency’s fall is unlikely to last while others feel the huge downdraft in the U.S. dollar thus far in 2025 has run its course.
The euro’s recent fall following the U.S.- EU trade deal are likely to prove temporary, Monex Europe analysts say in a note. Euro-zone economic growth looks set to recover, supporting the euro over the medium term, they say. This view is bolstered by data released earlier that showed the French economy grew by a better than expected 0.3% in the second quarter.
On the other side of the equation some analysts see the U.S. dollar rebounding.
The euro fell below $1.15 today after trading near $1.18 just last Friday. Concerns about the economic impact of 15% tariffs on the EU as part of the bloc’s deal with the EU have weighed on the euro.
The euro currency could face renewed losses if euro-zone and U.S. data show a sharp divergence in economic growth that favors the U.S. dollar, ING says in note.
France reported stronger-than-expected but mild second-quarter economic growth of 0.3%. German second-quarter growth data are due at 0800 GMT.
If the U.S. data outperform euro-zone data then the euro could fall below $1.15, the note stated. That is consistent with ING’s call for a weaker euro in the third quarter followed by a recovery to $1.18 in the fourth quarter.
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