Dollar Wraps Up Best Month of Trump’s Term as Economy Holds Up

Forex

Summary:

The U.S. dollar had its best month of 2025, rising 2.5% in July, driven by strong economic data, hawkish Fed signals, and Trump’s trade deals. Rate cut expectations for September have faded.

The dollar is wrapping up its best month of 2025 as the world’s largest economy powers ahead and President Donald Trump inks trade deals.

The Bloomberg Dollar Spot Index has risen 2.5% in July, the only positive month since President Donald Trump was sworn into office back in January. While Federal Reserve officials have said growth is moderating, data showed this week showed the US economy expanding at a 3% pace in the second quarter, a solid print given the backdrop of changing trade policy.

Fed Chair Jerome Powell also hinted on Wednesday that interest rates may stay elevated for longer, helping push the dollar index higher and trimming overall losses for the year to 7%. The greenback rose on Thursday, extending a five-day winning streak.

“After a period of significant weakness, we have seen the dollar find some bids given resiliency in US economic data, progress on tariff negotiations, and exhaustion in selling,” said Nathan Thooft, a senior portfolio manager at Manulife Investment Management.

Dollar Wraps Up Best Month of Trump’s Term as Economy Holds Up_1

Dollar Set for Best Month This Year | US currency rebounds after six months of losses.

The Bloomberg dollar index rose to day’s high after data showed that Fed’s preferred measure of underlying inflation increased in June at one of the fastest paces this year, underscoring limited progress on taming inflation.

Interest-rate swaps now show just a 40% chance the Fed reduces rates in September, and an 80% chance of a move in October — which was seen as a sure thing before Powell spoke on Wednesday.

The rebound in the dollar marks a reversal, even if it turns out to be brief, in what’s been a historically bad year for the currency. The economic turmoil created by Trump’s trade war and constant policy U-turns, along with a tax-cut bill that has pledged to expand the US budget deficit, has undermined the greenback’s status as the ultimate reserve currency.

The dollar’s plunge also reflected a rush among non-US investors to hedge against further declines in the currency. Standard Chartered Plc chief financial officer Diego de Giorgi said in an interview earlier Thursday that a lot of the bank’s large corporate clients and wealthy individuals put hedges in place last quarter to protect against further dollar weakness.

What Bloomberg’s Strategists Say...

“The US dollar is poised for further gains in the weeks ahead. Resilient US economic data, a Federal Reserve that isn’t ready to cut interest rates, and a wave of trade agreements are all feeding into a stronger greenback.”

— Nour Al Ali, Macro Markets & Squawk. See MLIV for more analysis.

The next jobs report on Friday will give investors another reading on how the US economy is faring. Powell also flagged that there are several economic reports, including two months of data on employment and inflation, that might shift their thinking before the September meeting.

The soaring US stock market is also lending support to the greenback. With the S&P 500 on track for a third month of gains, that’s pulling in money from investors around the world. As well, blockbuster earnings from big tech companies underscore America’s dominance in the race for artificial intelligence.

While some had feared during the selloff that international investors would ditch their US holdings, recent data suggests that hasn’t happened. Foreign investor holdings of Treasuries climbed in May, and US dollar’s share of allocated foreign-exchange reserves held by global monetary authorities was steady in the first quarter of 2025.

Dollar Wraps Up Best Month of Trump’s Term as Economy Holds Up_2

Dollar Recovery | Bloomberg Dollar Index is poised for its first monthly gain this year

“To keep shorting the dollar against a currency basket, we’re going to need something drastic from Trump or a US-centric slowdown,” said Ben Ford, FX strategist at Macro Hive.

Another theme boosting the case for the dollar versus other currencies, like euro or yen, is that Trump extracted a trade deal that is more beneficial for the US than its trading partners. The euro has fallen almost 3% against the dollar this month, with German industry leaders warning tariffs will make Europe less competitive.

The accord “reinforces the old paradigm of US dominance,” said Brent Donnelly, president of Spectra Markets and a veteran FX trader. “However you slice and dice the details, the trade deal appears to be an embarrassment for Europe.”

The yen and the British pound were the worst performers in the Group of 10 against the greenback in July, with both currencies losing 3.5% or more. The Canadian dollar fell the least.

For the months ahead, options shows that traders are expecting modest gains. That’s in contrast in May and June, when they were betting on more depreciation.

Source: Bloomberg

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Manuel

Economic

Political

President Trump on Thursday said he was granting Mexico a 90-day reprieve on higher tariffs, saying he would extend Mexico's current tariff rates to allow for more time for negotiations.

"We will be talking to Mexico over the next 90 Days with the goal of signing a Trade Deal somewhere within the 90 Day period of time, or longer," Trump wrote on social media after talking with Mexico's president, Claudia Sheinbaum.

The extension avoids a further escalation with the US's largest trade partner as Trump's sweeping tariffs get set to go into effect Friday. In the days and hours before his tariffs are set to come into full force, Trump has unleashed a flurry of deals and trade moves.

Those include a new pact with South Korea and an extension of Mexico's current tariff rates for another 90 days. The South Korea agreement includes a 15% tariff rate on imports from the country, while the US will not be charged a tariff on its exports, according to Trump's post on Truth Social.

Deals were also expected with Thailand and Cambodia after Monday's ceasefire. A deal with Taiwan was also reportedly close.

On Wednesday, the president made other moves, including threatening a 25% tariff on goods from India and slapping 50% tariffs on many goods from Brazil — but exempting some of the country's key exports.

Trump also signed several orders Wednesday:

One order imposes 50% tariffs on semi-finished copper products starting Aug. 1, excluding copper scrap and input materials.

Another ends the de minimis exemption on low-value imports under $800, thereby applying tariffs from Aug. 29.

The third order targets Brazil, but it exempts key US imports like orange juice and aircraft parts that benefit Embraer (ERJ).

Meanwhile, Treasury Secretary Scott Bessent said on Thursday that the US and China now have "the makings of a trade deal," days after the countries wrapped up a third round of talks.

Also, the US and EU are racing to lock in the final details of their agreement.

Source: Yahoo Finance

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Adam

Economic

In just over two hours last night, investors got a clear snapshot of the U.S. economy and markets heading into the second half of 2025. It began with the Federal Reserve holding interest rates steady, followed by earnings from Microsoft and Meta.

Starting with the Fed: the U.S. central bank has kept rates elevated for months to contain inflation and maintain flexibility in case the economy struggles with Trump administration policies. President Trump, on the other hand, wants lower rates to stimulate growth, reduce the dollar’s strength, ease federal financing, and support his broader economic agenda. In typical Trump fashion, he blasted the Fed as “morons” running a “sadomasochistic” policy, and again targeted Chair Jerome Powell—especially after Powell’s comments last night.

Markets expected rates to remain in the 4.25%–4.50% range—and they did. But investors were also looking for Powell to signal a likely cut in September. That didn’t happen. Powell struck a more cautious tone than expected. In central bank jargon, that’s “hawkish,” the opposite of “dovish.” So hawkish, in fact, that odds of a September cut dropped below 50% for the first time in weeks.

Economists note the Fed’s message shifted from “we’re waiting for positive data to cut” to “we need convincing evidence before we cut.” It’s a subtle but meaningful change. Two FOMC members, Michelle Bowman and Christopher Waller, pushed for a cut at this meeting, which was anticipated given their prior comments. Bank of America summed it up: the theme of the night was “effective.” Powell stressed that as long as the economy holds up, keeping rates steady is more effective than cutting too soon and risking an emergency hike later. In short, the Fed remains firmly in risk-control mode.

Hawkish signals usually dampen equity sentiment—but not last night. Why? Microsoft and Meta delivered blowout earnings that overshadowed rate worries. After-hours trading showed Microsoft up 8% and Meta soaring 11.5%. These two giants—worth more together than the entire French stock market—lit a fire under global markets. Futures turned sharply higher, and European and Asian indexes followed suit. The driver? Explosive growth in AI adoption, where Microsoft and Meta dominate thanks to their vast ecosystems.

Elsewhere, the U.S. signed a 15% tariff deal with South Korea, matching the EU agreement. But tensions with India are rising as Washington moves forward with a 25% surcharge and sanctions over Russian oil imports. A compromise may come this week, but the tone is hardening. Relations with Brazil are also strained; Washington hit the country with a 40% tariff hike to force compliance. Meanwhile, China’s latest PMI data signaled industrial contraction and near-flat services activity, while Japan’s central bank held rates steady and raised inflation forecasts.

The earnings calendar is also in overdrive—July 30 ranks among the busiest days of the year for corporate reports, setting up more market-moving news.

In Asia, Japan’s Nikkei 225 snapped a four-day losing streak, gaining 1%. South Korea and India, under tariff pressure, slipped 0.5%. Hong Kong’s Hang Seng fell 0.6%, and Australia edged down 0.1%. European futures opened higher but trimmed some overnight gains.

Source:marketscreener

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Adam

Stocks

Economic

According to a new report from Vanda Research, investor appetite for meme stocks like Kohl’s (KSS), Krispy Kreme (DNUT), and GoPro (GPRO) has dropped sharply as traders shift their attention to Big Tech earnings and broader market drivers.

“Just like that, the meme stock frenzy of July 2025 has seemingly fizzled out,” Vanda’s Marco Iachini wrote. Across a basket of popular meme names, average daily turnover plunged as much as 90% in recent weeks. The lone exception is the fintech SoFi (SOFI), which saw a recent jump in trading tied to its common stock offering.

The cooldown in retail-driven trades comes as major companies like Meta (META), Microsoft (MSFT), and Apple (APPL) deliver earnings that could set the tone for the broader market. Thus far, Meta and Microsoft have reported robust quarterly earnings, powered in part by their AI efforts.

“It’s not surprising to see retail activity take a breather,” Iachini noted. With Big Tech earnings underway and a Federal Reserve meeting now in the rearview mirror, retail investors are reallocating toward more established players rather than high-risk names. While meme stock flows made headlines, they didn’t ignite the kind of broad-based retail frenzy seen during the GME episode in 2021, he added.

Over the past month, Kohl’s is down 88%, and Krispy Kreme has shed roughly 84%. Other onetime favorites like Opendoor Technologies (OPEN) and SharpLink Gaming (SBET) have also lost steam.

Meanwhile, institutional investors are playing a bigger role in driving the market. Since April, the rally has largely been fueled by retail and systematic flows. But for stocks to keep climbing through the second half of the year, "discretionally institutional investors may need to play a larger role,” per Iachini.

Still, retail traders haven’t disappeared — they’ve just become more selective. Shares of Kohl’s spiked 2,589% in trading volume the week of July 21 after it became the target of a meme stock trading frenzy fueled by users on Reddit's WallStreetBets.

Krispy Kreme saw an even steeper 4,371% surge during that period, powered by similar circumstances, despite weak first quarter earnings results and ending a partnership with McDonald’s (MCD). GoPro (GPRO), which has emerged as a favorite among speculative traders, didn’t miss out on the action. Its trading volume ballooned 2,727% that same week.

But the recent meme stock pop hasn’t come close to its 2021 peak. This brief shift toward riskier assets, sparked by hopes for rate cuts, easing inflation, and a soft landing, now appears to be under reconsideration.

“Speculative trading tends to resurface when bullish momentum in risk assets stretches over multiple months,” Iachini wrote. “But behavior may lean more opportunistic than momentum-driven in the days ahead.”

Source: finance.yahoo

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Owen Li

Central Bank

U.S. inflation increased in June as tariffs boosted prices for imported goods like household furniture and recreation products, supporting views that price pressures would pick up in the second half of the year and delay the Federal Reserve from resuming cutting interest rates until at least October.

The report from the Commerce Department on Thursday showed goods prices last month posting their biggest gain since January, with also solid rises in the costs of clothing and footwear. The U.S. central bank on Wednesday left its benchmark interest rate in the 4.25%-4.50% range and Fed Chair Jerome Powell's comments after the decision undercut confidence the central bank would resume policy easing in September as had been widely anticipated by financial markets and some economists.

"The Fed is unlikely to welcome the inflation dynamics currently taking hold," said Olu Sonola, head of U.S. economic research, Fitch Ratings. "Rather than converging toward target, inflation is now clearly diverging from it. This trajectory is likely to complicate current expectations for a rate cut in September or October."

The personal consumption expenditures (PCE) price index rose 0.3% last month after an upwardly revised 0.2% gain in May, the Commerce Department's Bureau of Economic Analysis said. Economists polled by Reuters had forecast the PCE price index climbing 0.3% following a previously reported 0.1% rise in May.

Prices for furnishings and durable household equipment jumped 1.3%, the biggest gain since March 2022, after increasing 0.6% in May. Recreational goods and vehicles prices shot up 0.9%, the most since February 2024, after being unchanged in May. Prices for clothing and footwear rose 0.4%.

Outside the tariff-sensitive goods, prices for gasoline and other energy products rebounded 0.9% after falling for four consecutive months. Services prices rose 0.2% for a fourth straight month, restrained by cheaper airline fares and steady prices for dining out and hotel stays.

In the 12 months through June, the PCE price index advanced 2.6% after increasing 2.4% in May.

The data was included in the advance gross domestic product report for the second quarter published on Wednesday, which showed inflation cooling, though remaining above the Fed's 2% target. Economists said businesses were still selling inventory accumulated before President Donald Trump's sweeping import duties came into effect.

They expected a broad increase in goods prices in the second half. Procter & Gamble (PG.N), opens new tab said this week it would raise prices on some products in the U.S. to offset tariff costs.

The Fed tracks the PCE price measures for monetary policy.

Excluding the volatile food and energy components, the PCE price index increased 0.3% last month after rising 0.2% in May. In addition to higher goods prices, the so-called core PCE inflation was lifted by rising costs for healthcare as well as financial services and insurance.

In the 12 months through June, core inflation advanced 2.8% after rising by the same margin in May.

Stocks on Wall Street were mixed. The dollar was steady against a basket of currencies. U.S. Treasury yields fell.

A line chart titled "Annual change in US Personal Consumption Expenditures Price Index" that compares two key inflation metrics over the past five years.

CONSUMER SPENDING STEADY

The BEA also reported that consumer spending, which accounts for more than two-thirds of economic activity, rose 0.3% in June after being unchanged in May. The data was also included in the advance GDP report, which showed consumer spending growing at a 1.4% annualized rate last quarter after almost stalling in the first quarter.

In the second quarter, economic growth rebounded at a 3.0% rate, boosted by a sharp reduction in the trade deficit because of fewer imports relative to the record surge in the January-March quarter. The economy contracted at a 0.5% pace in the first three months of the year.

Spending is being supported by a stable labor market, with other data from the Labor Department showing initial claims for state unemployment benefits rose 1,000 to a seasonally adjusted 218,000 for the week ended July 26.

But a reluctance by employers to increase headcount amid uncertainty over where tariff levels will eventually settle is making it harder for those who lose their jobs to find new opportunities, which could hamper future spending.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, was unchanged at a lofty seasonally adjusted 1.946 million during the week ending July 19, the claims report showed.

The government's closely watched employment report on Friday is expected to show the unemployment rate rising to 4.2% in July from 4.1% in June, according to a Reuters survey of economists.

Economists expect pressure from tariffs and a slowing labor market will put a brake on consumer spending in the third quarter. Slow growth is likely already in the works as inflation-adjusted consumer spending edged up 0.1% in June after declining 0.2% in May.

Precautionary saving could also curb spending. The saving rate was unchanged at 4.5% in June.

Though a third report from the Labor Department showed wage growth picking up in the second quarter, inflation-adjusted annual gains moderated to 0.9% from 1.1% in the 12 months through March.

The BEA report showed inflation cutting into income for households after accounting for taxes, which was flat in June.

Signs of financial strain are also emerging among higher-income households, who have largely been driving spending. Lower- and middle-income families have been disproportionately affected by tariff-related price increases, higher borrowing costs and slowing economic activity.

"While consumer spending has thus held up — supported by solid income gains — it now faces mounting headwinds from a cooling labor market and renewed inflationary pressures," said Gregory Daco, chief economist at EY-Parthenon.

Source: Reuters

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Adam

Commodity

A major exemption to President Donald Trump’s 50% copper tariff has shocked traders and sent U.S. market prices plummeting.

The final order on copper tariffs, which the Trump administration says will boost the domestic copper production industry, applies to semi-finished products such as pipes, rods, sheets and wires. It also impacts copper-intensive items like cables and electrical components. But crucially, it does not include the raw input material copper cathode, copper ores, concentrates or scraps, as had been widely expected.

However, analysts say that may not be enough to avoid prices for a range of consumer goods containing the metal, from cookware to air conditioning units to plumbing parts, being pushed higher as a result of the tariffs.

U.S. copper prices on the Chicago Mercantile Exchange (CME) shot to a record high earlier this month, also hitting an all-time premium over the global benchmark London Metal Exchange (LME), following the initial July announcement of a 50% tariff. While importers had already sent refined copper flooding stateside at record levels through the first half of the year in anticipation of new duties, the scale of a blanket 50% rate jolted markets and put severe upward pressure on U.S. prices.

The eventual reveal on Wednesday of a tariff targeting only semi-finished products has provided yet another massive shock. In the minutes after the news, COMEX copper (metals futures contracts on the CME) fell 19% in the biggest intraday fall on record, according to bank ING.

The gap between COMEX above LME prices has been around 30% since the initial July 8 announcement, implying continued uncertainty that the overall tariff rate would end up at 50%.

However, traders were instead considering possible exemptions for countries such as major exporter Chile, or for delays to full implementation of tariffs, Albert Mackenzie, copper analyst at Benchmark Mineral Intelligence, told CNBC.

The actual situation is almost a 180-degree pivot from what was expected and what was being priced in to the CME, which was tariffs on refined copper, Mackenzie continued.

The deviation sent the CME price premium plummeting from around $2,637 at the start of Wednesday to just $90 on Thursday morning in Europe, Mackenzie said — a scale of a drop that would look like a mistake were it not for the tariff context, he added.

Downward U.S. price pressure

While traders were taking advantage of a price arbitrage, part of the reason for the huge redirection of copper supply into the U.S. has been that it would take decades for the country to be able to sufficiently increase domestic production of the metal to meet demand. The U.S. currently imports around half its copper, with major exporters including Chile, Canada, Peru and Mexico.

Analysts at Deutsche Bank stressed the “huge shock to the market” this week, noting Thursday that shares of Arizona-based miner Freeport-McMoRan— the copper company most exposed to tariffs on refined copper driving up U.S. prices — closed over 9% lower the previous day.

“Fundamentally, this does not change the copper supply-demand balance (and arguably improves it due to less demand destruction risk), but is likely to put COMEX under heavy pressure,” they wrote.

Downward price pressure is likely to follow through onto the LME on a less dramatic scale, they said, in the wake of the massive build-up in refined inventories in the U.S. so far this year. The overhang “could see high shipments from the U.S. back into the global market,” they said, where supply has become tight.

Duncan Wanblad, CEO of mining giant Anglo American– which has major copper operations around the world – told CNBC’s “Squawk Box Europe” on Thursday that while there was currently a “material dislocation” in the placement of inventories, the demand fundamentals for copper “look great.”

“Through a medium- to long- term lens, the fundamentals of copper are really underpinned by the fact that demand is looking to be very strong still in terms of the world’s need for an energy transition, for the likes of battery-electric vehicles, for the likes of new energy supply, data centers, AI,” he said. Supply on that longer-term outlook remains constrained, he added, amid difficulties obtaining permits and getting product into market.

Consumer goods impact

One policy revealed Wednesday is that the copper tariffs will not stack on top of Trump’s new duties on automobile imports, meaning only the latter rate would apply to an impacted product.

However, Benchmark Mineral Intelligence’s Mackenzie pointed out that a lower U.S. market price premium does not mean no feed-through into prices for consumer products.

“If you’re a manufacturer of fridges or air conditioning units, or even houses, you don’t buy copper cathode. You buy wiring and other semi-finished copper products, which are the things being tariffed. So it’s reasonable to assume the price increase will be reflected in some end goods,” Mackenzie said.

Russ Bukowski, president of manufacturing software company Mastercam, agreed.

“Although there are currently high inventories of copper in the country, the 50% increase on copper tariffs is going to hurt manufacturers in the long run and lead to higher production costs,” Bukowski told CNBC.

“To stay afloat, manufacturers may have to pass these costs to consumers, which will likely drive-up prices on various goods.”

Michael Reid, senior U.S. economist at RBC Capital Markets, said the impact on consumer prices would be “nuanced.”

“The largest sectors that use copper as inputs include motor vehicles, plumbing fixtures and valve fittings, communications wire (i.e., cable and internet providers), and various electrical components. To that end, the manner by which those products are made matters – which is to say, if a car is imported, its copper content won’t be tariffed,” Reid said by email.

“Where we would expect to see it impact consumer prices the most would be in the housing/construction sector where copper inputs play a big role for electric wiring and plumbing.”

“But in the context of the overall cost of a house, the impact is not as harsh as the 50% may sound – assuming the typical cost of plumbing and electric components is $10k then an aggressive full passthrough to the end consumer would mean costs rise to $15k. In the overall cost of a home, that $5k increase would be around 10%,” he added.

Source: cnbc

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Adam

Economic

Tariff-related price hikes may start to bite at the end of the third quarter as companies may by then have sold off U.S. stockpiles built up ahead of the new duties, according to the International Chamber of Commerce.

Businesses making everything from cars to drugs and cheese and wine have expedited deliveries to the United States this year to get ahead of U.S. President Donald Trump's tariffs.

They have about four months of inventory, about one month more than average, Andrew Wilson, International Chamber of Commerce deputy secretary general, estimated on Thursday, helping some delay hiking prices.

"You could expect it to bite at the end of Q3," he told Reuters once they have sold off that inventory. Wilson previously forecast tariff-related price hikes would show up in U.S. inflation in the fourth quarter or early next year.

Data on Thursday showed U.S. inflation increased in June as tariffs started raising the cost of some goods, supporting economists' expectations that price pressures would pick up in the second half.

Some of the world's biggest companies have warned for months that they would be squeezed by duties.

They have now started to outline how they plan to pass on the costs and change their businesses to try to cushion the blow of rising costs, uncertainty over U.S. trade policy, and waning consumer confidence.

Companies are testing how much they can pass tariffs onto U.S. customers.

But global retailers including sandal maker Birkenstock and jeweller Pandora have also looked at raising prices across multiple markets to avoid hurting U.S. sales.

"There's a logic taking hold that (price hikes) won't be just borne by the U.S. consumer," he said.