The US dollar traded lower over the week, briefly touching six-week lows as Middle East tensions, centred on the US and Iran and the Strait of Hormuz, fuelled risk aversion. The Dollar Index slipped to 99.90 for the first time since mid-June before trimming losses late in the North American session. Reports of Japanese Ministry of Finance intervention to support the yen added to the move, while US Treasury yields rebounded on Friday, with the 30-year reaching levels last seen in June 2007 and the 10-year rising to 18-month highs.
Federal Reserve Policy and Economic Indicators
The Federal Reserve held rates at 3.50%–3.75%, but a 9–3 vote included three calls for an immediate 25-basis-point rise as inflation stayed above target. Inflation data showed headline CPI at 3.5% year on year in June versus 4.2%, with core at 2.6% versus 2.9%, while jobs momentum softened: June Nonfarm Payrolls rose 57K, May was revised to 129K from 172K, and unemployment eased to 4.2% from 4.3%. CFTC data for the week to 21 July showed net dollar longs at 15.6K contracts versus 13.2K, with open interest at 54.0K; the four-week change was +2.7K, and percentiles stood at 59 and 47.1. Markets now look to the next CPI release, ISM surveys and July NFP.
