Economic Reports Stir Markets
USD whips on data but wilts on U.S. President – DBS
The DXY Index climbed 0.7% to 98.4 overnight, primarily on profit‑taking sparked by better‑than‑expected U.S. new home sales (NHS). Earlier, the index consolidated in a narrow 97.8–98.0 range throughout the Asian and European sessions, digesting last Friday’s 0.9% sell‑off to 97.7 following Federal Reserve Chair Jerome Powell’s signal for a September rate cut. DBS’ FX analyst Philip Wee cautioned against reading too much into July’s NHS surprise, noting that on a 12‑month rolling sum basis, sales contracted for a fifth consecutive month — underscoring weak underlying demand and mounting inventories.
Dallas Fed President Lorie Logan flagged potential money‑market strains at the end of 3Q25, adding to reasons keeping the September rate cut in play. However, she emphasized that the Fed had the tools to manage such temporary stress. Logan hinted that easing could extend beyond September, urging investors to look past the dot plot toward the diversity of views in next month’s Summary of Economic Projections.
Market focus will likely turn to the Fed’s median estimate of the neutral rate, which rose in June to 3% from a pre‑pandemic 2.5%, still below the current 4.25–4.50% Fed Funds Rate.
Given the market’s high sensitivity to U.S. data, the DXY could quickly reverse lower on disappointing consumer sentiment figures. Consensus expects the Conference Board’s consumer confidence index to ease slightly to 96.5 in August from 97.2 in July — a reading misaligned with shockingly weak nonfarm payrolls. August payrolls are projected to remain below 100k for a fourth consecutive month.
As previously noted, tariffs remain a top concern for consumers, likely keeping prices elevated. However, this Friday’s PCE report is expected to show headline inflation slowing to 0.2% MoM in July from 0.3% in June, while the core measure holds steady at 0.3%.
Despite all these developments, DBS maintains its negative view on the USD. The DXY slipped 0.2% this morning following the U.S. President’s announcement to remove Fed Governor Lisa Cook, underscoring the administration’s determination to reshape the board and maintain pressure on Powell to deliver rate cuts.