Fed’s Bowman and Waller shift tone, boosting rate cut bets
The U.S. dollar weakened on Monday after Federal Reserve Governor Michelle Bowman, known for her hawkish stance, suggested the central bank should begin considering interest rate cuts. Her comments, paired with earlier dovish remarks from Fed Governor Christopher Waller, raised expectations that rate cuts could begin as early as the next Fed meeting on July 29-30.
“Bowman’s pivot toward easing is significant given her usual tone,” said Helen Given, trading director at Monex USA. “Markets are reacting to the clear shift in sentiment.”
Following the remarks, Fed funds futures priced in 58 basis points of cuts in 2025, up from 46 before Waller’s comments on Friday. Chicago Fed President Austan Goolsbee also downplayed the inflationary impact of tariffs, reinforcing the dovish pivot.
Middle East tensions ease, pressure on dollar grows
The greenback also lost ground as fears of wider escalation in the Middle East began to ease. After the U.S. bombing of Iranian nuclear sites, Iran launched a missile strike on the Al Udeid U.S. base in Qatar. Though the attack was labeled “devastating” by Iranian officials, the U.S. confirmed no casualties, which helped calm markets.
“There’s no sign Iran is getting direct military backing from Russia or China, which is keeping the conflict contained,” said Given.
Dollar index falls, euro and pound rebound
The dollar index slipped 0.32% to 98.45 after earlier hitting a high of 99.42. The euro climbed 0.39% to $1.1567, despite euro zone PMI data showing another month of stagnant growth. Sterling also rebounded, gaining 0.51% to $1.3517 after touching a low of $1.3367. U.K. business activity inched up in June, but job cuts and geopolitical worries weighed on sentiment.
Yen pares losses as oil prices pressure Japan
The Japanese yen pared earlier declines, ending the day down just 0.09% at 146.22 per dollar. Analysts say sustained high oil prices could reweigh on the yen, given Japan’s reliance on Middle Eastern imports for over 90% of its oil.
