Dovish Fed comments pressure dollar, stocks rebound, yields fall

From Yahoo Finance: 2025-06-23 15:37:00

The dollar index fell by -0.33% on Monday, reversing from a 3-week high due to dovish Fed comments. Fed officials Bowman and Goolsbee indicated support for a rate cut at the next FOMC meeting. Stocks rebounded, reducing demand for the dollar. Yields on 10-year T-notes fell to a 6-week low, impacting interest rate differentials.

After a weekend US attack on Iran, the dollar initially rose to a 3-week high on Monday. Stronger-than-expected US PMI and home sales reports supported the dollar. Safe-haven demand boosted the dollar due to geopolitical tensions.

US June S&P manufacturing PMI remained steady at 52.0, surpassing estimates of a decline. May existing home sales unexpectedly rose by +0.8% to 4.03 million, contrary to expectations of a decline.

Fed Governor Bowman expressed support for a rate cut at the next meeting if inflation remains subdued. Chicago Fed President Goolsbee suggested a resumption of rate cuts if tariffs continue to impact inflation.

The markets are currently pricing in a 23% chance of a -25 bp rate cut after the July FOMC meeting. EUR/USD rose by +0.42% on Monday, recovering from early losses due to weaker Eurozone PMI reports and dovish ECB comments.

The Eurozone manufacturing PMI remained steady at 49.4, below expectations. ECB member Centeno emphasized the need for more stimulus to reach the 2% inflation target. Swaps indicate a 6% chance of a rate cut at the July 24 ECB meeting.

USD/JPY rose by +0.07% on Monday, hitting a 1-1/4-month low against the dollar due to concerns over rising energy costs. The yen recovered most losses after dovish Fed comments and positive Japanese economic news.

August gold and July silver closed higher on Monday, driven by geopolitical tensions and dovish central bank comments. Precious metals saw increased demand as safe-havens. Fund buying and ETF holdings at multi-year highs also supported prices.

Stocks rallied on Monday, limiting the upside in precious metals. Iran’s minimal retaliation against the US reduced safe-haven demand for metals after missile attacks were intercepted with no damage.

Read more: Dollar Pressured by Dovish Fed Comments