US Dollar Hits 13-Month High Before Retreating on Weak Data

The US dollar index reached a 13-month high after the Federal Open Market Committee maintained a hawkish stance on interest rates. This surge pressured the euro and the yen and sent gold and silver to their lowest levels in over six months. In response to the volatility, Japanese Finance Minister Satsuki Katayama coordinated with US Treasury Secretary Scott Bessent on potential bold currency interventions, while the euro hit a one-year low following dovish comments from European Central Bank President Christine Lagarde.

The dollar subsequently retreated after the release of disappointing macroeconomic data, including a 4.5% month-on-month drop in durable goods orders for May and weak consumer spending. These figures, alongside comments from Federal Reserve official Williams, reduced market expectations for a September rate hike. This shift allowed the Japanese yen to recover from 40-year lows, despite internal Japanese conflict between the Bank of Japan's goal to raise rates to 2% and Sanae Takaichi's push for economic stimulus.

External geopolitical factors provided mixed signals. Political instability in the UK followed Prime Minister Keir Starmer's announcement that he would step down. Meanwhile, the US dollar avoided further escalation after the White House reported no injuries and continued cargo movement following an Iranian attack on a tanker in the Strait of Hormuz.