The U.S. dollar’s trajectory will hinge on why markets are pricing in more aggressive Fed rate cuts, according to a Commerzbank analyst:

• If the shift reflects a belief that U.S. tariffs will have a milder-than-expected inflationary impact, the dollar could stage a short-term rebound.
• But if the rate-cut expectations stem from concerns that the Fed is yielding to political pressure, the currency may face further downside.

The note adds that while the Fed is widely expected to keep rates unchanged in July, any dissenting vote in favour of a cut could raise alarm over the central bank’s independence.

Earlier, the biggest drop in 50 years for the US dollar:

• “1H” decline of 10.8% for the USD is NOT one hour! Its the fall in one half, ie six months

This article was written by Eamonn Sheridan at www.forexlive.com.

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