The dollar index rose by +0.24% on Monday, reaching a new 2.5-week high. President Trump’s tariff threats against the EU and Mexico may delay rate cuts from the Fed, supporting the dollar. Cleveland Fed President Hammack also voiced inflation concerns, further bolstering the dollar’s position.

President Trump’s announcement of 30% tariffs on EU and Mexican goods, starting August 1, contributed to the dollar’s rise on Monday.

Cleveland Fed President Hammack emphasized the need for inflation to decrease before considering interest rate cuts, pointing to the importance of monitoring policy impacts.

Markets are currently pricing in a 5% chance of a -25 bp rate cut at the upcoming FOMC meeting on July 29-30.

EUR/USD fell by -0.21% on Monday, touching a new 2.5-week low due to President Trump’s tariff threats. Despite this, the euro was supported by rising German bund yields.

Swaps are indicating a 2% probability of a -25 bp rate cut by the ECB at the July 24 policy meeting.

USD/JPY rose by +0.22% on Monday, hitting a 3-week low against the dollar amid concerns about Japan’s upcoming election.

Japanese government bond yields rose to a 3.5-month high on Monday, strengthening the yen’s interest rate differentials.

The Japan May tertiary index exceeded expectations with a +0.6% m/m increase.

Japan’s May core machine orders declined by -0.6% m/m, less than anticipated.

Japan’s May industrial production was revised down to -0.1% m/m from the previously reported +0.5% m/m.

Gold and silver prices fell on Monday due to a stronger dollar index and higher global bond yields.

Precious metals prices initially rose on Monday following increased tariff threats from President Trump and rising US inflation expectations.

Read more at Yahoo Finance: Latest US Tariff Threats Boost the Dollar