Dollar index hits lowest level since 2022 as Fed rate cut bets increase

The dollar index extended its decline to 97 on Thursday, its lowest level since February 2022, as growing expectations suggest the Federal Reserve may cut interest rates sooner than previously expected. The Wall Street Journal reported that President Donald Trump is considering naming his preferred candidate for the next Fed Chair as early as September or October. This move would effectively install a “shadow” chair, who could influence market sentiment and steer policy in a more dovish direction. President Trump has repeatedly criticised current Chair Jerome Powell for maintaining existing rate levels and failing to deliver further cuts. Despite the pressure on the dollar, US equities ended the day in positive territory. The S&P 500 rose by 0.67% to close at 6 132.86, while the Nasdaq gained 0.70% to reach 20 112.81. The Dow Jones Industrial Average also advanced, finishing 0.80% higher.

European stocks were mixed, largely holding onto the previous session’s losses as investors weighed the outlook for fiscal and monetary policy across the region’s largest economies. The STOXX 50 edged down 0.20% to 5 244, while the broader STOXX 600 posted a modest gain of 0.10% to 538. The FTSE 100 recorded a modest rise, of 0.35%, driven by strength in commodity-linked shares. Mining stocks traded higher in both London and Switzerland, supported by a strong performance in base and ferrous metals. Rio Tinto, Glencore and Anglo American each climbed around 5%. In contrast, technology shares came under pressure after ASML was downgraded by analysts, sending its stock down 2.50%.  Shell dismissed speculation about a potential takeover of BP, stating there were no current plans for such a move. Meanwhile, a stronger pound, trading at its highest level since October 2021, weighed on major exporters, with Unilever and British American Tobacco both falling more than 2%.

WTI crude futures rose over 1% on Thursday, nearing $66 per barrel, while Brent crude gained 0.61% to close at $68.09. Markets remain cautious amid mixed signals on US-Iran tensions and supply risks. Despite US airstrikes, Iran’s uranium stockpile appears largely untouched and Tehran has suspended cooperation with the UN nuclear watchdog. President Trump denied Iran moved nuclear material before the strikes and declared the conflict “over,” though he vowed to keep targeting Iran’s oil revenue. Oil had dipped earlier in the week on hopes the Israel-Iran ceasefire would hold. Focus now shifts to the 6 July OPEC+ meeting, where Russia may support a production increase. President Trump also admitted that sanctions have not stopped China from buying Iranian oil. Meanwhile, US crude stocks fell by 5.84 million barrels to an 11-year seasonal low, with Cushing inventories down for a third week. In precious metals, gold edged up 0.04% to $3 335.08 an ounce, while platinum jumped 7.03% to $1 421.60.

Asian markets closed mixed as investors weighed easing Middle East tensions and shifting US policy expectations. Japan’s Nikkei 225 rose 1.65% to 39 584.58, marking its strongest level since January 2025. In contrast, Hong Kong’s Hang Seng slipped 0.68% to 24 308.39, while China’s Shanghai Composite edged down 0.17% to 3 450.05. 

South Africa’s stock market showed positive momentum. The FTSE/JSE All Share Index rose 0.69% to finish at 95 968.26 points, while the JSE Top 40 gained 0.71%. The JSE Resource 10 led the gains with a strong increase of 2.66%. Meanwhile, the Producer Price Index (PPI) inflation for May 2025 fell to 0.10%, down from 0.50% in the previous two months and well below the 0.70% rise forecast by analysts. This marked the lowest reading since November 2024.