The US dollar has been taken on a rollercoaster ride this week. The US CPI and PPI reports for May have suggested that price pressures are gradually easing. These somewhat promising data reports have boosted investors’ expectations for rate cuts, despite a fairly hawkish FOMC meeting on Tuesday and Wednesday. As a result, the 10-year Treasury yield is now 20bp lower than last week. Despite the fall in yields, though, the dollar appears to be a touch stronger now than it was last Friday. And that seems to be because the euro, which accounts for almost two thirds of the basket of currencies the DXY index is calculated against, has depreciated sharply on the back of growing political uncertainty in the EU. Overall, we still see scope for the dollar to appreciate slightly against other currencies in the near term.
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