The dollar's decline this year risks accelerating, with June providing a number of potentially negative catalysts. The 2025 decline, though steeper by more than 7% — so far orderly, but the scale and scope of the dollar's selling is likely to increase on any dovish Fed pricing later in the year.
The dollar fell on Monday — down against all G10 currencies — after just posting its fifth straight monthly decline in its longest losing streak since 2020.
Traders began the month grappling with deteriorating diplomatic relations between the U.S. and China over trade and weaker-than-expected U.S. manufacturing data. The White House remains optimistic that the two leaders will meet, with a phone call potentially coming as early as this week.
Meanwhile, sentiment ahead of Friday's NFP report faded, with Thursday's jobless claims posting their third-highest reading of the year and continuing claims rising to their highest level since 2021. That turned more attention to Friday's estimate of 128,000 — a significant cooldown from last month's 177,000 print.
Then comes the June FOMC decision on the 18th, with an updated SEP and Chairman Jerome Powell's tone set to guide interest rate pricing as markets look for clarity on the Fed's next move. Swaps reflect just two rate cuts from the Fed this year, with traders leaning toward September for the first.
Layer on the Senate's preliminary hearing on President Donald Trump's "One Big Beautiful Bill" and a market that remains very short of dollars, and the stakes for the greenback couldn't be higher. (alg)
Source: Bloomberg
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