Confidence Falls as Rate Cut Bets Rise (30 June-4 July)

The US dollar fell to 97.1, its lowest since Feb 2022, as Powell’s dovish stance and Trump’s rumored Fed pick raised concerns over central bank independence. Weak PCE data added pressure.

The euro rose past $1.17 on easing geopolitical risks and Germany’s pro-growth budget. The pound climbed above $1.374 as the BoE hinted at more cuts. The yen held near two-week highs on dollar weakness and sticky inflation.

Brent crude hovered near $68 but faces its worst week since Mar 2023 as the ceasefire eased supply fears. US demand and a weaker dollar offered support.

Gold slipped to a four-week low near $3,250 as geopolitical risks faded and hopes for a US-China trade deal reduced tariff concerns. The White House signaled openness to adjusting upcoming tariffs. Silver stayed near $35.90, lifted by Fed rate cut bets, a weaker dollar, and strong industrial demand, outperforming gold this month.

Bond markets remained relatively calm. U.S. 10-year yields edged down to 4.27% on growing rate cut expectations. Japanese 10-year yields rose to 1.45% as inflation in Tokyo stayed above BoJ’s target, supporting potential further tightening.

US S&P Global Manufacturing PMI (Jun)

The Flash Manufacturing PMI held steady at 52 in June, matching May’s 15-month high and surpassing forecasts of 51. Factory output expanded for the first time in four months, while new orders dipped only slightly. Hiring picked up at the fastest pace in a year, and improvements in inventory and delivery times also supported momentum. Rising input and output prices, at their highest since July 2022, reflect firms passing on costs with stockpiling linked to tariff concerns. However, S&P Global’s Chris Williamson cautions that this temporary support may unwind soon.

US S&P Global Services PMI (Jun)

Services PMI edged down to 53.1 from 53.7, still slightly above expectations and pointing to continued strength in the sector. Domestic demand remained strong, even as export orders weakened under tariff pressure. Firms hired more staff to manage backlogs and rising workloads. Price increases were driven by surging wages, fuel, and financing costs. However, business confidence dipped due to uncertainty around future tariff developments.

CB Consumer Confidence (Jun)

Consumer sentiment fell to 93 in June from 98.4, signaling growing unease. The Present Situation Index dropped to 129.1, and the Expectations Index slipped to 69. Consumers were less thrilled about current business conditions and job availability, though the labor market remains relatively strong, according to the Conference Board’s Stephanie Guichard.

US New Home Sales (May)

New home sales plunged 13.7% to a seasonally adjusted 623,000 units in May, wiping out April’s revised 9.6% rise and marking the steepest drop since June 2022. Elevated mortgage rates and economic uncertainty kept buyers on the sidelines. Sales fell sharply in the South and Midwest, while the median home price rose to $507,000. At the current pace, housing supply sits at 9.8 months, well above typical levels.

Durable Goods Orders (May)

Durable goods orders surged 16.4% in May to $343.6 billion, the biggest monthly gain since July 2014 and far exceeding forecasts. The jump was driven by a 230.8% leap in nondefense aircraft orders, lifting transportation equipment overall by 48.3%. Business investment remained strong, with core capital goods (excluding aircraft) rising 1.7%, indicating continued confidence in future demand.

US GDP (QoQ) (Q1)

The economy contracted by 0.5% in Q1 2025, a sharper decline than the previously estimated -0.2%, marking the first negative quarter in three years. Weaker consumer spending (up just 0.5%) and lower export growth dragged on GDP. Meanwhile, a surge in imports (up 37.9%) ahead of anticipated tariff hikes offset gains. Federal spending dropped 4.6%, though fixed investment climbed 7.6%, showing some resilience in business activity.

Initial Jobless Claims

Initial claims declined by 10,000 to 236,000 in the week ending June 21, below expectations but still elevated compared to the yearly average. Continuing claims rose by 37,000 to nearly 2 million, the highest since late 2021, pointing to longer job search periods. Federal claims dipped slightly following layoffs at the Department of Government Efficiency.

US Core PCE Price Index (YoY) (May)

Annual core PCE inflation rose to 2.7% in May from 2.6% in April, matching expectations. The headline rate ticked up to 2.3%. On a monthly basis, prices increased by 0.2% and 0.1% respectively. Personal income dropped 0.4%, while spending edged down 0.1%, suggesting consumers are becoming more cautious.

Currencies

The US dollar index slid to 97.1, its weakest level since early 2022, with growing expectations for Fed rate cuts. Powell’s dovish tone and speculation that Trump might replace him added to the pressure. The euro soared past 1.17, fueled by stronger risk appetite and Germany’s aggressive public investment plans. The pound rallied above 1.374, with BoE officials hinting at rate cuts due to softening labor data. Meanwhile, the yen hovered around 144.3, supported by a weakening dollar and steady domestic inflation.

Commodities

Brent crude rose to $68, capping a volatile week shaped by Middle East tensions and a subsequent ceasefire. Trump’s mixed signals on Iran’s oil exports and US sanctions created uncertainty, though rising US fuel demand and low inventories supported prices.

Gold fell to $3,250 as safe-haven flows eased after the US-China trade agreement and delays in tariff enforcement.

Silver, however, climbed to $35.90, gaining 11% in June, strengthened by Fed rate cut bets, industrial demand, and tighter supply.

Equities

Stocks surged to record highs, driven by geopolitical relief and hopes for more Fed cuts. Most indices gained 3–4%, excluding the Dow. Tech led the way: Nvidia jumped 7%, Microsoft and Meta rose 4%, Apple added 2%, while Google bucked the trend, dipping 1.4%.

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