Dollar Continues to Weaken as Trump Monopolizes News Feeds – Currency Thoughts
Dollar Continues to Weaken as Trump Monopolizes News Feeds
August 6, 2025
Since late Tuesday, the dollar has fallen 0.4% against the euro, kiwi and on a weighted DXY basis. The greenback has also dropped 0.8% vis-a-vis the Mexican peso , 0.3% versus the Australian dollar and 0.2% relative to sterling, the Turkish lira and Canadian dollar.
The SPX, DOW and Nasdaq have risen around 0.5%, but the Russell 2000 is down 0.4%. Stock markets in the Pacific Rim closed up 0.6% in Japan and 0.5% in China but down 0.9% in India and Taiwan. Equity gains so far today in Spain and Italy have exceeded those in Germany, France and Great Britain.
Ten-year sovereign debt yields have risen two basis points in Japan, Germany, France and Spain and by a basis point in the United States and Italy. Bitcoin’s price climbed 0.5%, while the costs of gold and oil are little changed.
As expected, the Reserve Bank of India‘s policy interest rate was left unchanged at 5.5%. The decision by the Monetary Policy Committee was a unanimous one at the latest bi-monthly review. At the three reviews during the first half of 2023, the rate had been cut by a combined percentage point, and before that it had been steady at 6.5% for the previous two years going back to February 2023.
The MPC noted that, while headline inflation is much lower than projected earlier, it is mainly due to volatile food prices, especially of vegetables. Core inflation, on the other hand, has remained steady around the 4 per cent mark, as anticipated. Inflation is projected to go up from the last quarter of this financial year. Growth is robust and as per earlier projections though below our aspirations. The uncertainties of tariffs are still evolving. Monetary policy transmission is continuing. The impact of the 100 bps rate cut since February 2025 on the economy is still unfolding.
Even as RBI officials were deliberating, U.S. President Trump made India’s tariff situation even more precarious, threatening to double the U.S. tariff on imports from India to 50% within three weeks if India continues to buy oil from Russia.
Trump continued to monopolize the news in other respects,
- He promised to reveal his nominee later this week to replace Adriana Kugler as a Federal Reserve governor. She had joined the Board in September 2023 to fulfill a departing governor’s term but just resigned prematurely before the term expires.
- He revealed that the field of choices still in the running to become the next Fed chairman is been reduced to just four candidates, and the finalist will be named pretty soon.
- There is also a vacancy to be filled to replace the chief of the Bureau of Labor Statistics.
Today’s batch of European data releases accentuate sluggish activity. Retail sales volume in the euro area went up 0.3% in June, merely reversing a 0.3% drop in May. With a 0.9% monthly decline in French retail sales, that economy lagged behind the other largest members of the joint currency bloc, while Spain’s 1.4% advance led them.
Producer prices in the euro area, meanwhile, went up 0.3% on month and 0.6% on year in June, ending a trio of three straight monthly declines. Non-energy PPI inflation slowed 0.2 percentage points to 0.9% but was outweighed by a greatly reduced on-year drop in energy deflation to just -0.1%.
Euroland’s July construction purchasing managers index printed at a 5-month low of 44.7. The French and Italian readings of 39.7 and 48.8 were their lowest in ten and nine months, respectively. Germany’s 46.3 score was its highest in five months.
Industrial orders in Germany had been projected to advance during June but instead fell by 1.0%, leaving such just 0.8% above the June 2024 level. That followed on-year increases above 5.0% in both April and May. Export orders sank 3.0% in the latest month.
The British construction PMI index fell to a 62-month low of 44.3 in July, quite far from last September’s peak of 57.2, and the AiG-compiled Australian purchasing managers index for the construction sector weakened to a 3-month low.
Czech industrial production dropped 1.1% in June and recorded its weakest year-on-year comparison (+0.2%) in five months.
Italian industrial production rose 0.2% on month but fell 0.9% on year during June.
Ireland’s service sector purchasing managers index declined to a year and a half low of 50.9 in July.
Second-quarter labor statistics reported in New Zealand revealed a 0.1 percentage point uptick in the jobless rate to 5.2%, a 0.1% dip in employment growth, and lessening on-year labor cost growth of 2.2%.
Thailand consumer price inflation became more negative at -0.7% in July.
Japanese average cash earnings in June increased 2.5% year-on-year in June, which translates to a 2.6% drop on an inflation-adjusted basis.
The Canadian composite and service sector purchasing manager indices for July rose to a six- and eight-month high of 48.7 and 49.3, respectively. The composite index has been below 50, the level separating expansion from contraction, since January.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: construction PMIs, Euroland PPI and retail sales, Reserve Bank of India
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