Dollar Dips as Fed Hike Bets Ease, Treasuries Gain: Markets Wrap
(Bloomberg) — The dollar weakened against most of its major peers after soft US economic data reduced bets on a Federal Reserve interest-rate hike next month. Treasuries rose.
A Bloomberg gauge of the currency slipped 0.1%, hovering around levels last seen in May. Pressure on the dollar increased after US government data on Friday showed retail sales fell in July by the most in more than a year as consumers pulled back on purchases.
Swaps traders see around a one-in-four chance the Fed will raise rates next month. That’s down from about 50% odds only a week ago. Treasuries rose across the curve. The yield on the rate-sensitive two-year note fell two basis points to 4.15%, while that on the benchmark 10-year eased one basis point to 4.68%.
Elsewhere, oil swung between gains and losses as traders looked for the next catalyst to set direction, with renewed Israeli attacks on Lebanon and the prospect of fresh US sanctions on Iran adding to geopolitical uncertainty. Brent traded at $88.40 a barrel, having climbed to almost $89. A gauge of Asia Pacific stocks rose 0.1% with South Korean financial markets shut for a holiday.
Successive soft US inflation prints and the weak retail sales report have prompted traders to pare back expectations the US central bank will boost borrowing costs by year-end — a narrative that had been buying buoying the dollar.
President Donald Trump’s regular conversations with Fed Chair Kevin Warsh and renewed attempts to fire Governor Lisa Cook are also factors that weigh on the greenback, according to Richard Franulovich, head of foreign-exchange strategy at Westpac Banking Corp. in Sydney.
“Regular Trump-Warsh dialogue, renewed attempts to remove Cook, and a murky Fed reaction function keep questions about the US dollar’s safe-haven hedge properties alive,” he said. “Revamped de-dollarization is another upside catalyst, reinforced last week by multi-year high yields for US 10 and 30-year auctions.”
The US Treasury will sell 20-year bonds this week in a test of investor appetite for long-term debt following a few record-breaking auctions.
Last week, the US government sold 30-year bonds at the highest interest rate in a quarter century, a testament to investors’ demand for greater compensation to finance the nation’s growing deficit.
Monday’s cautious trading came as investors watched for efforts to reopen the Strait of Hormuz, which may weigh on oil after the commodity jumped almost 6% last week. With stocks near record highs due to a revival in the artificial intelligence trade, attention remained on the Middle East for the next market catalyst.
“The most significant headwind for the market currently remains geopolitical uncertainty, which continues to weigh on market sentiment here and there, although the relative lack of military activity in the Middle East has lowered volatility at the margins,” said Kyle Rodda, a senior analyst at Capital.com.
In other corners of the market, futures contracts for the S&P 500 and the Nasdaq 100 Index advanced. Gold inched up 0.4% to about $4,390 an ounce.
The yen edged higher against the dollar after a report showed Japan’s economic growth unexpectedly slowed in the three months through June as capital spending continued to slump.
A slew of Chinese data, including retail sales and industrial production, will be in published Monday. Economists expect consumer spending to have picked up slightly in July, while factory output may have slowed, according to Bloomberg surveys.
China’s “macro momentum continues to deteriorate” as credit growth has slowed and inflation remains weak, Wee Khoon Chong, a strategist at BNY, wrote in a note to clients. “July activity data are likely to reinforce the slowdown, with retail sales and high-tech investment the key areas to watch for resilience.”
Corporate News:
Stripe Inc. has finalized an agreement to acquire OpenRouter Inc. for more than $7 billion, according to people familiar with the matter. Anthropic PBC is telling prospective investors its second-quarter revenue jumped at least 14-fold versus the same period a year ago, according to documents seen by Bloomberg News. Alibaba Group Holding’s open-weight models have accumulated more than 3 billion global downloads in the past six months, eclipsing Meta Platforms Inc., Alphabet Inc. and domestic peers to become the world’s No. 1 artificial-intelligence model. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 10:38 a.m. Tokyo time Nikkei 225 futures (OSE) fell 0.1% Japan’s Topix fell 0.6% Australia’s S&P/ASX 200 fell 0.1% Hong Kong’s Hang Seng rose 1% The Shanghai Composite rose 0.1% Euro Stoxx 50 futures rose 0.3% Currencies
The Bloomberg Dollar Spot Index fell 0.1% The euro was little changed at $1.1579 The Japanese yen rose 0.1% to 159.09 per dollar The offshore yuan was little changed at 6.7423 per dollar Cryptocurrencies
Bitcoin rose 0.2% to $63,124.64 Ether rose 0.6% to $1,891.26 Bonds
The yield on 10-year Treasuries was little changed at 4.68% Japan’s 10-year yield advanced five basis points to 2.925% Australia’s 10-year yield advanced five basis points to 5.05% Commodities
West Texas Intermediate crude rose 0.2% to $82.60 a barrel Spot gold rose 0.5% to $4,400.33 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Anya Andrianova, Ruth Carson and Matthew Burgess.
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