Trump Assassination Attempt Supports the Dollar

The U.S. Dollar index (DXY) is rising by 0.3% to 104.40 points this week, while the EURUSD is up by 0.2% to 1.08830. The American currency is exhibiting less volatility than expected.

Federal Reserve (Fed) Chair Jerome Powell recently expressed greater confidence in achieving the 2.0% inflation target, citing a series of declining inflation data from April to June. This marks a significant shift from his previous week's cautious rhetoric in Congress, where he was more hawkish. Powell's optimism may be influenced by recent inflation data and other macroeconomic indicators showing a slowdown in U.S. inflation. Additionally, the assassination attempt on Donald Trump, now a leading presidential candidate, may have impacted policymakers. This incident could pressure the Fed to introduce monetary easing soon to achieve new all-time highs for stocks and bolster economic progress before the November elections.

Despite these dynamics, the U.S. 10-year Treasuries yields remain mostly unchanged at 4.18%. Investors seem to understand that the Fed has no other choice but to cut interest rates in September, yet they also believe that Trump’s economic policies (Trumponomics) would eventually restore high interest rates and a strong Dollar.

Large investors, according to WisdomTree Bloomberg US Dollar Bullish Fund (USDU), are betting on the Dollar's strength. They are now awaiting U.S. June retail sales numbers to make their final bets. Wall Street expects a decline, but surprises could occur. The European Central Bank (ECB) is anticipated to pause its interest rate cut process while making dovish comments.

Technically, the EURUSD is poised for a small correction towards 1.08100-1.08400. The future movements are uncertain; the EURUSD could surge to 1.10000, or alternatively, it may dive towards 1.05000 if the support at 1.08100-1.08400 does not hold.