A wave of speculation shook global markets yesterday amid rumors that President Trump was preparing to dismiss Federal Reserve Chair Powell. This uncertainty pushed short-term interest rates lower, steepened the yield curve, and triggered a sharp sell-off in the dollar, while equities dropped. Although Trump later denied the rumors, the damage had been done, and markets only partially recovered. Today, the dollar is finding renewed support but remains within yesterday’s wide range. Meanwhile, despite weak job data from the UK and Australia, the British pound is showing relative strength among G10 currencies, while the Aussie dollar hit new monthly lows.

Asia Pacific Markets

In Asia, the Japanese yen experienced heightened volatility. The dollar initially surged close to JPY149.20 but reversed direction amid widespread dollar weakness, dropping near JPY147 before stabilizing. Japan’s trade data revealed a shift from a sizable deficit in May to a surplus in June, a seasonal trend. Additionally, Japanese investors have increased foreign asset purchases this year.
Meanwhile, the Australian dollar struggled following a weaker-than-expected labor report. Only 2,000 new jobs were created in June, with full-time positions declining significantly. This pushed the Aussie down to around $0.6460, approaching key technical support levels.

European Markets

The euro ended its five-day losing streak when reports surfaced about Trump potentially firing Powell, which led to a dollar sell-off. The euro jumped to a four-day high near $1.1720 before pulling back after the White House walked back the statement.
Sterling also rebounded after hitting a low not seen since May, briefly recovering to around $1.3485. However, weak UK employment data added new pressure. Job losses continued for the fifth straight month in June, and the unemployment rate climbed to 4.7%. As a result, markets now price in a high likelihood of rate cuts from the Bank of England in the coming months.

American Markets

The Dollar Index experienced sharp fluctuations, initially rising to 98.90 before falling to 97.70 amid Powell-related rumors. After Trump’s denial, the index recovered to around 98.80 but failed to break previous highs. Today’s U.S. economic calendar is packed: June retail sales are expected to edge higher following two months of declines, while import prices could signal a rising inflation trend. Jobless claims may show an uptick, and flat business inventories for May could indicate future price hikes. Despite global concerns, foreign investors have shown strong interest in U.S. assets, buying significantly more this year compared to early 2024.