Weekly Wrapup: Fed Turbulence, Trade Threats & the Dollar’s RollerCoaster (Week of 21 – 24 July 2025)
Weekly Wrapup: Fed Turbulence, Trade Threats & the Dollar’s RollerCoaster
(Week of 21 – 24 July 2025)
1. Narrative Arc – From Dovish Murmurs to Hawkish Echoes
The fourday stretch opened with dovish Fed commentary, swung violently on renewed tariff saberrattling, and ended under a haze of leadership uncertainty at the world’s most powerful central bank. Monday’s session saw Governor Waller admit that “a sixweek delay in cuts would not be critical,” an unexpected concession that sent U.S. yields three to six basis points lower and clipped the greenback’s wings . By Tuesday, the tone had flipped on its head: a House GOP member referred Chair Powell for criminal investigation while Treasury Secretary Bessent hinted the entire Fed “needs review,” stoking fears of institutional upheaval and triggering the steepest oneday drop in DXY in over a month .
Wednesday brought temporary relief. Bessent floated an extension of the 12 August tariff deadline in bilateral talks with Beijing and confirmed that Powell was “free to leave early if he wishes,” language markets interpreted as an olive branch rather than an eviction notice. Treasury yields dipped, risk assets bounced, and EUR/USD enjoyed a third straight rally around 1.17 as euro option desks snapped up topside calls .
But calm proved fleeting. On Thursday the President doubled down on his “1 % rates” mantra, secured a tariff accord with Japan, and hinted fresh 25–35 % levies could slam Canada, Brazil and possibly the EU by August. The prospect of weaponized trade and political meddling in monetary policy rekindled risk aversion and propelled USD/JPY through 147 before sellers emerged near the technical barricade at 148.0 .
2. Macro & Policy CrossCurrents
Inflation & Growth Signals. Monday’s U.S. housing starts beat—1.321 mn vs 1.286 mn expected—masked fragility beneath the headline as singlefamily starts contracted 4.6 % . Tuesday’s NY Fed loan survey suggested easier access to autofinance and mortgage refis, hinting that credit easing is offsetting some rate drag . Across the Atlantic, the ECB’s corporate survey showed oneyear inflation expectations slipping to 2.5 % from 2.9 %, but longterm views stuck at 3 %, underscoring the Governing Council’s quandary ahead of this week’s meeting .
Political Overhang. Powell’s job security vacillated with every headline. Tuesday’s FoxNews report of a criminal referral blasted Treasury futures higher, while Bessent’s midweek reassurance that “there is no immediate reason for Powell to step down” soothed nerves only temporarily . The G20 finance ministers weighed in from Rio, issuing their first joint communique since October pledging to protect centralbank independence—a pointed rebuke to Washington’s rhetoric .
Trade Front. Brussels diplomats confessed they are drafting a broader “range of countermeasures” should U.S.EU talks stall, even as von der Leyen prepares to fly to Beijing for a simultaneous summit . The market readthrough: tariffs are likely to expand before they contract, embedding a persistent inflation premium into forward curves.
3. ForeignExchange Pulse
Dollar Index (DXY): Whiplashed in a 1.2point range, posting its worst singleday drop in a month on Tuesday (0.49 %), only to claw back half those losses by Thursday afternoon. Intraday volatility spiked to levels last seen in May as gamma sellers retreated .
EUR/USD: Threeday ascent stalled near 1.1760, a level visible as the Bollingerband cap on the 4hour chart, page 2 of the 24 July report. Spot now finds layered support at 1.17, 1.1655, then 1.1570 .
USD/JPY: The pair oscillated between policy angst and safehaven flows—USD strength on higher yields countered by yen demand whenever Fed chaos headlines hit. Technicals on page 2 of the 23 July brief show a descending RSI and soft stochastics, warning of fatigue above 147 .
GBP/USD: Cable weathered yet another UK GDP downdraft but managed to reclaim 1.3520 as gilts ignored flatlining growth and traders positioned for a BoE cut only in August and November (down from three cuts) .
Commodity FX: AUD faded as ironore prices slipped; CAD’s employment resilience was eclipsed by chatter of a 35 % tariff volley from Washington, pressuring the loonie despite oil stability .
4. Commodities & Real Assets
Crude Oil. Brent chopped between $82 and $86: earlyweek selling followed reports of prospective EUtargeted tariffs that could dent transAtlantic demand, but prices firmed after a Japanese accord promised downstream autosector stimulus .
Gold. XAU/USD oscillated $3 361 – $3 430, twice bouncing at the 200day SMA. The spot chart on page 2 of both 22 and 24 July briefs illustrates a risingchannel pattern, reflecting consistent haven demand whenever Fed headlines strike .
5. Rates & Credit SnapShot
Treasuries mimicked a yoyo: Monday’s bullsteepening reversed into a bearflattening as Powell rumors ebbed, leaving the 2s10s spread virtually unchanged at +47 bp by Thursday’s close. Investmentgrade spreads widened four basis points into Tuesday’s chaos but snapped tighter postJapan deal as auto names rallied .
6. Risk Matrix for the Coming Fortnight
August 1 Tariff Cliff: With multiple U.S. partners bracing for fresh levies, positioning ahead of the deadline will dictate FX volatility. Option markets are pricing a 12vol figure move in EUR/USD straddles .
FOMC Governance Cloud: Any White House hint of a personnel change could inject 10–15 bp swings in the 2year and catalyze a dollar meltup or meltdown depending on narrative direction .
ECB Meeting & Flash PMIs: Weak HCOB readings (49.5 projected for manufacturing) risk undercutting euro optimism just as traders eye 1.18 topside stops .
UK Retail Slump: Friday’s expected –2.7 % MoM may prove the trigger for another GBP flush toward June lows if BoE communication turns more dovish .
7. Tactical Playbook
FX: Fade EUR/USD rallies into 1.18; stay long USD/JPY above 146.0 but trail stops aggressively.
Rates: Enter conditional 2yr payer spreads to hedge a surprise hawkish Fed outcome; maintain 5s/30s steepeners into tariff risk.
Commodities: Accumulate gold on dips under 3 370; own gamma in frontmonth Brent options between $80 and $88.
Equities: Barbell strategy—own major automakers and banks (tariff beneficiaries and higheryield winners) while hedging cyclicals via S&P puts.
8. Bottom Line
Markets spent the week trying to price a perfect storm: politicized monetary policy, weaponized trade, and stubborn inflation. The dollar’s net progress was modest, but intraweek volatility reminded traders that positioning complacency is a luxury they can ill afford. With Powell’s future hanging in the balance and August’s tariff clock ticking, expect risk assets to stay hostage to tape bombs and soundbite diplomacy.
