Dollar momentum stalls as Fed dissent signals emerge
The greenback failed to sustain its rally as dovish signals tempered USD strength.
US two-year yields fell four basis points as consumer inflation expectations declined sharply and Fed officials hinted at potential policy dissent.
University of Michigan survey showed one-year inflation expectations dropping to 4.4% from 5.0%, returning to pre-tariff levels, while medium-term expectations eased to 3.6%.
US equities retreated from session highs as sectoral tariff headlines emerged late in Friday’s trading session.
Reports suggest targeted tariffs could be implemented as early as August 1st, with announcements potentially covering lumber, semiconductors, critical minerals and pharmaceuticals.
Prime Minister Ishiba’s ruling coalition suffered a major setback in the Upper House election, failing to win a majority in the upper house election. For the first time since 1955, a leader from Japan’s historic political party will take office without holding a majority in either house of the legislature. NZD/USD and AUD/USD gains 0.5% and 0.3% respectively, whilst USD/SGD and USD/CNH remain flat overnight
Waller stirs Fed policy debate as USD/SGD shows positive momentum
Fed Governor, Christopher Waller called for open discussion within the Federal Open Market Committee (FOMC) to avoid the pitfalls of groupthink. In a Bloomberg TV interview, he hinted at dissenting during the July 28–29 meeting, backing a 25bp rate cut that runs counter to the committee’s majority view.
“I think this is healthy. I think this is a turning point in the way we want to think about policy. Some people don’t want to cut, some do want to cut. Coming out and making the case either side, that’s healthy debate”
In Asia-Pacific FX markets, the Singapore dollar (USD/SGD) has climbed above its 30-day average. The next key support lies at 21-day EMA of 1.2698. Conversely, the next key resistance levels lie at 50-day EMA of 1.2878 and 100-day EMA of 1.3004.
A global FX week of inflation, policy, and PMI pulse
With CPI releases across Asia-Pacific and Europe, as well as the European Central Bank’s policy meeting, traders will be watching for signals on the direction of monetary policy and growth momentum.
The week kicks off with New Zealand’s Q2 CPI on Monday, expected at 0.6% QoQ and 2.8% YoY, up from 0.9% QoQ and 2.5% YoY previously. This will be closely watched for RBNZ policy implications, especially after recent hawkish commentary. New Zealand’s June trade balance follows on Tuesday, with the prior month’s surplus at NZD 1.24bn.
Japan’s July Tokyo CPI (ex-fresh food) is due Friday, with consensus at 3.0% YoY, slightly below the previous 3.1%. Singapore’s June CPI and industrial production will also be in focus, providing further insight into regional inflation and growth trends.
Thursday is a pivotal day for Europe, with the ECB announcing its latest policy rates. The same day, flash July PMIs for France, Germany, the Eurozone, and the UK will offer a timely read on manufacturing and services activity. Last month’s readings remained below 50 for most, signaling contraction, with only UK services above the threshold.
The US calendar features June existing and new home sales, with new home sales expected to rebound to 650k from 623k. Weekly jobless claims and July’s preliminary S&P Global manufacturing PMI are also due Thursday, while Friday brings June durable goods orders, forecast to fall 10.3% after a strong 16.4% gain previously.
UK data highlights include June retail sales on Friday, after a weak May showing (ex-auto fuel -2.8% MoM, -1.3% YoY). July’s GfK consumer confidence is also due, with the prior reading at -18, reflecting ongoing household caution.
Aussie edges higher as dollar weakens slightly
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 21 – 25 July
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
