The dollar index (DXY00) today is up by +0.16%.  The dollar is climbing today due to higher T-note yields. Also, weakness in stocks today has boosted some liquidity demand for the dollar.  Gains in the dollar are limited after the Jul Chicago Fed national activity index fell more than expected.  The dollar also has some negative carryover from last Friday when Fed Chair Powell said downside risks to employment are rising and the shifting balance of risks may warrant adjusting monetary policy.

The dollar is also pressured on concerns over Fed independence after President Trump said last Friday that he would fire Fed Governor Lisa Cook if she didn’t resign amid allegations of mortgage fraud.

The US Jul Chicago Fed national activity index fell -0.37 to -0.19, weaker than expectations of -0.11.

US Jul new home sales unexpectedly fell -0.6% m/m to 652,000 from an upwardly revised 656,000 in Jun (originally reported 627,000), still stronger than expectations of 630,000.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 81% at the September 16-17 FOMC meeting and at 53% for a second -25 bp rate cut at the following meeting on October 28-29.

EUR/USD (^EURUSD) today is down by -0.14%.  The euro is sliding today due to strength in the dollar. Also, doubts about an imminent end to the Russian-Ukrainian war are negative for the euro.  The euro recovered from its worst levels after the German Aug IFO business climate survey rose more than expected to a 16-month high.  Also, comments from ECB President Lagarde supported the euro when she said tariffs may only have a small effect on Europe’s GDP. 

The German Aug IFO business climate survey rose +0.4 to a 16-month high of 89.0, stronger than expectations of +0.2 to 88.8.

On the geopolitical front, diplomatic efforts to end the war in Ukraine remain elusive, as the US tries to broker a peace deal between the two countries.  On Sunday, Russian Foreign Minister Lavrov said there was no meeting planned between the leaders of Russia and Ukraine and that there “needs to be an agenda first” before a meeting can take place.  “This agenda is not ready at all.” The outcome could have macroeconomic implications regarding tariffs and oil prices, and could, of course, have significant consequences for European security.