Dollar recovers as markets face major volatility

Indeed, the Buck seemed to be affected by a variety of factors, but certainly the data for second-quarter Gross Domestic Product growth did not help. While the Fed seems to not be in agreement that inflation needs to be combatted by hiking interest rates, a slowdown from an expected 2.0% quarterly pace to just 1.5% adds to concern that the economy is also not headed in the right direction. Lack of faith in the Fed’s ability to rein in inflation mixed with disappointment in productivity made for an ugly time for the Greenback’s fortunes.

We shall see if the University of Michigan consumer Sentiment survey for July reveals anxiety about current conditions. Personal Income as well as Personal Spending were significantly reduced in June in comparison to the month prior going from 0.7% to 0.2% and from 0.9% to 0.3% respectively. At the moment, the USD’s direction is quite unclear and traders as well as investors are playing a bit of a guessing game on what is next. This may finally provide a cycle of high volatility after a period of relative calm that was mainly impacted by the shifting narratives about tensions and fighting in the Middle East. Thus far, it looks like July could mean a loss of around 1.1% for the Buck overall per the Bloomberg Dollar Spot Index.

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YEN

The Japanese Yen is down this morning by half a percent, calming down after having its wildest day in a while. Yesterday marked the Yen’s highest single-day gain of the year at 2.4%, while also representing the best intra-day performance during New-York-Trading hours since December 2023. The reason for the craziness was a surprise intervention by Japanese financial authorities, an operation reportedly around USD$31.0 Billion. The intervention apparently was also in coordination with South Korea, which saw its stock exchange, the Kospi Index, rise by 18.0% while KRW seesawed. We shall get more clarity as the day passes, but the Yen has at least gotten away from its weakest levels in 40 years.