- U.S. dollar heads for a 2.5% June gain, its strongest monthly advance since July 2025
- Euro tracks toward a 2.4% monthly drop, trading near $1.1386
- British pound holds steady as Burnham speaks to audience in Manchester
The U.S. dollar was on track for its strongest monthly gain in nearly a year on Monday, supported by rising expectations for Fed rate hikes and renewed confidence in the U.S. economy. Investors were also watching developments in the Gulf ahead of a key U.S. jobs report later this week.
The United States and Iran exchanged fresh attacks over the weekend before agreeing to pause hostilities and meet in Qatar on Tuesday. The fragile ceasefire left investors cautious and helped nudge oil prices higher.
The euro edged up 0.2% to $1.14 after falling to a 13-month low against the U.S. dollar last week. The single currency remains on pace for a 2.4% monthly decline.
The U.S. Dollar Index, which tracks the greenback against six major currencies, was steady at 101.34, holding near last week’s 13-month high. The dollar has gained against every major currency this month, with the strongest advances coming against Scandinavian and Antipodean currencies, which have fallen between 4.7% and 7%.
Rising inflation pressure, combined with a surprisingly hawkish debut from Federal Reserve Chair Kevin Warsh, has shifted market expectations away from rate cuts this year. At the same time, the AI-driven boom in U.S. equities has continued drawing capital into American markets at a rapid pace.
The dollar is now heading for a 2.5% gain in June, its biggest monthly advance since July 2025.
“That is quite significant because since April of last year, there’s been so much discussion about the structural decline in the value of the dollar,” Rabobank chief FX strategist Jane Foley said. “But I think, even if you vehemently believe that, you’ve got to admit that there is space for a cyclical uptrend.”
“This is exactly what we have. Some of this can be attributed to the fact that the expectations around Fed interest rate hikes were later in being priced in than, say, for the Bank of England and European Central Bank, which hit right at the beginning of the war. But also, if we look at the stock market, what we have, particularly since the start of the war, is this asset allocation very much in favour of the U.S.”
Weekly figures from the U.S. market regulator showed investors held their largest bullish position in the dollar against other major currencies since 2019, worth around $36.4 billion, according to LSEG data.
ECB Forum, U.S. Jobs Data in Focus
Later this week, the monthly U.S. employment report could give investors a clearer view of whether markets are accurately pricing the path for Fed rate hikes this year. Money markets currently show traders fully expect one rate hike this year, with roughly a 50% chance of a second.
The Japanese yen traded around 161.86 against the U.S. dollar, slightly weaker on the day and near its lowest level in 40 years. The Swiss franc strengthened modestly for a third straight session to 0.8085, still close to last week’s 11-month lows.
The British pound was steady at $1.322 after touching a seven-month low last week. Labour politician Andy Burnham, the leading candidate to replace Keir Starmer as prime minister, told an audience in Manchester on Monday that he would not announce any government appointments until the selection process is complete.
Investors are closely watching who Burnham chooses as finance minister, a decision that could shape the outlook for both the pound and the gilt market. Burnham said any economic plans would be “backed by discipline” and would follow current fiscal rules.
The European Central Bank’s annual forum also begins Monday, opened by President Christine Lagarde. A key policy panel on Wednesday will feature Warsh, whose comments are likely to be watched closely by investors looking for more insight into the new Fed chief’s thinking on rates.
