The odd mix of optimistic fundamental data, confusion over Fed Speak, and geopolitical turmoil generated large gains for the dollar during the front part of June, but resulted in a greenback fallout when all was said and done. While the quarter point rate hike by the US Fed increased the interest rate differential between the dollar and the major counter pairs, it was the lack of hawkish rhetoric that accompanied the announcement that precipitated dollar weakness. Politically, tensions have come to a standstill worldwide as Iran nuclear talks have been postponed, the Japanese public continues to demand the resignation of Toshihiko Fukui, and North Korea has already fired seven test missiles, including the long-range Taepodong 2 rocket. Beyond the geo-political issues however, only consistently positive economic news will likely provide further momentum for the dollar as the end of the Fed tightening cycle appears to be within reach.
Boris Schlossberg
Senior Currency Strategist
bschlossberg@fxcm.com
Terri Belkas
Junior Currency Analyst
tbelkas@fxcm.com
