Two developments could push the DXY Index below this month’s tight 98.4-99.4 range.
First, the US and China have reached a consensus towards re-establishing the terms of the agreement reached during the trade truce in Geneva on May 12. America should relax tech export restrictions in exchange for China resuming rare-earth mineral shipments. Washington requires Beijing to implement the Geneva trade pact before proceeding to talks for a trade deal before the 90-day tariff pause on China ends in August. Investors will welcome any easing in trade tensions between the world’s two largest economies and vice versa.
Second, US President Donald Trump will likely push the Fed again to lower rates if today’s CPI inflation readings remain stable despite higher tariffs. Consensus expects April’s headline inflation to be unchanged at the same 0.2% MoM pace as in March, and slightly higher at 0.3% MoM in April vs. 0.2% in March. Falling inflation expectations in the latest New York Fed survey should ease the Fed’s concerns over tariffs entrenching long-term inflation. Before entering this week’s blackout period, Fed speakers signalled that it would need more clarity on Trump’s policies before deciding. The futures market is pricing a 50-50 chance of a rate cut in September, assuming that trade deals are finalized by the end of the 90-day tariff pauses in July-August, during which the Trump administration is expected to have pushed through the One Big Beautiful Bill and raised the federal debt ceiling.
Last Friday, following the decline in nonfarm payrolls to 139k in May from 147k in April, Trump wanted the Fed to lower rates by 100 bps, adding that he would name a successor to Fed Chair Jerome Powell, whose term ends in May 2026, very soon. US Treasury Scott Bessent also wants long-term bond yields to fall and would be pushing to deregulate the banking sector later this year after pushing through Trump’s trade and fiscal agenda this summer. Overall, markets still need convincing that Trump’s push for tariffs, tax cuts, bank deregulation, and lower interest rates will not lead to high inflation.
Quote of the Day
“If you set out to be liked, you would be prepared to compromise on anything at any time, and you would achieve nothing.”
Margaret Thatcher
June 11 in history
Margaret Thatcher became the first British Prime Minister in 160 years to win a third consecutive term in 1987.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.