Macro Highlights June 2025 - USD Under Pressure as Fed, Tariff, and Growth Risks Build

US dollar declined 3.27% in June 2025, 1.8% drop this week alone, driven by weaker than expected economic data and a high tariff uncertainty. On June 18, 2025, while 2 rate cuts are expected, the fed expressed uncertainty on the effects of the tariffs with regards to inflation and the economy. DXY was seen at $97.26 (as of June 28, 2025), its lowest level since February 2022.

Key drivers include -

Pressure on the Fed Chair
Earlier this week, President Trump stated that a successor to Chair Powell will be announced by September or October 2025 ahead of Powell's May 2026 term-end. This led to uncertainty, leaving investors more cautious than bullish about the DXY.

Economic data
Recent US data was a surprise with ISM Manufacturing at 48.5, Services at 49.5, Retail Sales at -0.9%, and CPI just 0.1% m/m. While NFPs came in stronger at 139K, overall macro momentum remains soft.

Foreign Outflows and 'Sell America' Theme
Since April 2025, the Sell America investment trend has been impacting the value of the US dollar because of the investment outflows seen from foreign investors owing to the unpredictable US economy, fiscal policy, and tariffs.

US Bonds Yields
US Treasury yields continue to underperform relative to G7 peers, eroding USD carry appeal. Also, the widening yield differential is additionally pressurizing the dollar.

With an absence in trade policy or stronger economic data, we predict the USD weakness is likely to be a problem near term. A recovery could be possible with reduced tariff uncertainties, and economic data cooling at a slower pace.