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Investinglive Americas FX news wrap 6 Aug: Could there be peace in Ukraine? Fed shifting. | investingLive

The US dollar is closing lower versus the major currencies with the fall vs the EUR leading the charge (with a decline of 0.70%). The decline vs the JPY was only -0.15%. A ranking of the USD decline vs the major currencies showed:

  • EUR -0.70%
  • AUD -0.46%
  • NZD -0.46%
  • GBP -0.41%
  • CAD -0.23%
  • CHF -0.17%
  • JPY -0.15%

The decline in the USD came despite a rise in yields especially out the curve. The 10-year moved up close to 4 basis points. The 30 year rose 5.9 basis points. The 10 year note auction was met with fairly tepid demand with a positive tail of 1.1 basis points compared to an average over the last 6 months of -0.8 basis points. The Bid to Cover were also much lower vs the average indicative of weak demand.

Nevertheless, helping the dollars decline was a shifting of the focus at the Fed. Pres. Trump is expected to annnounce a replace replacement for Fed Kugler by the end of the week (Kuglers last day is August 8th). Board members have a permanent vote at each meeting. It is largely expected that Trump would an uber-dove.

Of course, with “too-late” Powell not being reappointed as Chair and the expectation that he would step down, would create another position to fill. Trump has indicated that the new Fed chair would be appointed by the end of the year creating a overlap between Powells last day and the new Fed Chair.

Another shift at the Fed helping to weaken the US dollar today is from the current members themselves.

  • Minneapolis Fed President Neel Kashkari said it may be appropriate to adjust the policy rate in the near term as the economy clearly shows signs of slowing. While the full inflationary impact of tariffs remains uncertain, he noted that the economy has held up well so far—largely because businesses built up inventories in anticipation. However, he stressed that the data pointing to an economic deceleration is more immediate and actionable, whereas the effects of tariffs on inflation may take longer to appear. Given this, Kashkari argued it might be better to cut rates now and pause later, rather than delay action while waiting for uncertain developments.Kashkari said he could see the case for two rate cuts this year, while leaving the door open for a pause or even a hike if inflation does rise meaningfully due to tariffs. He emphasized that wage growth is slowing, suggesting the labor market is cooling, and while the unemployment rate remains an important indicator, the Fed is aware that revisions to those numbers are always possible. He declined to comment on presidential personnel decisions but affirmed his trust in the integrity of BLS data. Ultimately, Kashkari stated that “you cannot fake economic reality”—people experience inflation and job conditions directly, and no data narrative can override those real-world effects.
  • Later in the day, San Francisco Fed President Mary Daly said the central bank will likely need to adjust monetary policy in the coming months, cautioning that the Fed “can’t wait for perfect clarity to act.” Speaking at the Anchorage Economic Summit, Daly noted that inflation—excluding the impact of tariffs—has been gradually trending lower and should continue to decline given the slowing economy and already restrictive policy stance. She downplayed the inflationary impact of new tariffs, saying they are unlikely to create persistent upward pressure that would require a policy response. Daly also voiced concern over the labor market, which she said has already softened, warning that additional slowing would be “unwelcome” given how quickly labor market weakness can accelerate. Ultimately, she argued that policy needs to be recalibrated to reflect shifting risks to the Fed’s goals.

Fed Chair Jerome Powell is scheduled to speak at the Jackson Hole Economic Symposium later this month, taking place August 21–23. While it’s possible he could make remarks before then, he may choose to hold off until the high-profile event – or at least be low key and uncommitted until then.

In geopolitical developments, a White House envoy Whitkoff met with Russian President Vladimir Putin today. Later, the White House confirmed that a meeting between President Trump and Putin could take place as soon as next week. That headline helped lift U.S. stocks into the close.

Separately, President Trump announced a 25% increase in tariffs on India, citing India’s continued purchases of Russian oil. The sharp hike is seen as a warning to other countries considering similar trade with Moscow. It’s reasonable to assume that if peace is achieved, the tariffs could be lifted just as quickly as they were imposed.

U.S. equities finished the day sharply higher. The NASDAQ rose 1.21%, while the S&P 500 gained 0.73%.

Crude oil fell and is closing below its 100 day moving average. Bitcoin rose by about $1000.

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