The dollar index (DXY00) Monday fell by -0.57% and posted a 3-1/4 year low. The dollar fell on the last day of Q2 and remains under pressure due to uncertainties over US trade policies with many nations trying to negotiate trade deals with the US before President Trump's July 9 deadline.  Also, rising deficits are bearish for the dollar as the Congressional Budget Office estimates the measure would add nearly $3.3 trillion to US deficits over the next ten years.  The dollar extended its losses after the June MNI Chicago PMI unexpectedly contracted by the most in 5 months.  

On the positive side for the dollar are signs of progress in trade negotiations with China and the EU.  Also, trade talks are back on with Canada after it withdrew a digital services tax. In addition, Indian and Japanese trade negotiators extended their stay in the US this week to iron out trade deals. 

The US June MNI Chicago PMI unexpectedly fell -0.1 to 40.4, weaker than expectations of an increase to 43.0 and the weakest report in 5 months.

Atlanta Fed President Bostic said much of the tariff pricing hasn't shown up in the marketplace yet, and he projects one 25-bp rate cut this year and three rate cuts in 2026.

The markets are discounting a 21% chance of a -25 bp rate cut at the July 29-30 FOMC meeting.

EUR/USD (^EURUSD) Monday rose by +0.51% and posted a new 3-3/4 year high.  The dollar's weakness on Monday supported the euro.  The euro rose Monday despite weak economic news from the Eurozone and dovish comments from the ECB.  German May retail sales fell more than expected, and the German June CPI rose less than expected, which are dovish factors for ECB policy and negative factors for the euro.  Also, ECB Vice President Guindos said he expects growth in the Eurozone in the second and third quarters this year "will be almost flat."

German May retail sales unexpectedly fell by 1.6% m/m, weaker than expectations of a +0.5% m/m increase and the biggest decline in more than 2-1/2 years.

The German Jun CPI (EU harmonized) rose +0.2% m/m and +1.7% y/y, weaker than expectations of +0.3% m/m and +1.8% y/y.

ECB Vice President Guindos said the Eurozone economy is stalling because of the "brutal uncertainty" surrounding global trade policy and that second and third quarter growth "will be almost flat."

Swaps are pricing in a 4% chance of a -25 bp rate cut by the ECB at the July 24 policy meeting.

USD/JPY (^USDJPY) Monday fell by -0.48%.  Increased safe-haven demand is supporting the yen today after President Trump stated that Japan is unfair in the auto trade, and he may maintain the 25% tariff on Japanese cars.  Gains in the yen accelerated Monday after the 10-year T-note yield fell to an 8-week low.   

The yen was undercut after Japanese May industrial production rose less than expected, a dovish factor for BOJ policy.  Also, Monday's rally in the Nikkei Stock Index to an 11-1/2 month high has curbed some safe-haven demand for the yen. 

Japan's May industrial production rose +0.5% m/m, weaker than expectations of +3.5% m/m.

August gold (GCQ25) Monday closed up +20.10 (+0.61%), and July silver (SIN25) closed down by -0.185 (-0.51%).  Precious metals on Monday settled mixed.  Monday's slide in the dollar index to a 3-1/4 year low is a bullish factor for metals prices.  Gold also has support as a store of value due to concerns that President Trump's spending and tax bill will increase the US deficit, as the CBO has estimated that the bill will add $3.3 trillion to the deficit over the next ten years. In addition, trade uncertainty has boosted demand for safe-haven assets, including precious metals, as nations scramble to negotiate trade deals with the US before President Trump's July 9 deadline.  Gains in gold prices accelerated Monday after the 10-year T-note yield fell to an 8-week low.  Fund buying of gold continues to support prices after gold holdings in ETFs rose to a 1-3/4 year high last Friday. 

Gains in precious metals prices were limited as Monday's rally in the S&P 500 to a new record high reduced safe-haven demand for precious metals.  Silver prices moved lower on Monday due to concern about demand for industrial metals after the US June MNI Chicago PMI unexpectedly contracted by the most in 5 months.  Also, ECB Vice President Guindos said growth in the Eurozone "will be almost flat" in the second and third quarters of this year.