Dollar’s bear run – From cracks to slides, the Greenback loses its grip

The dollar isn’t falling—it’s a slow-motion erosion of confidence. What started in April as a structural fissure has now turned into a smooth, cyclical descent. First came the doubt, now comes the drift. No tantrums, no crash—just a slow-motion exodus as traders quietly unwind America’s once-unshakeable macro narrative.

Volatility has faded everywhere except where it counts: FX. EUR/USD and USD/JPY implied vols are still elevated—like a coiled spring—suggesting markets are bracing for July’s tariff roulette. Behind the scenes, Brussels looks ready to stomach 10% tariffs to preserve what’s left of the transatlantic trade pact, while Washington tries to crack open Tokyo’s rice vault. That explains why USD/JPY has taken the lead in the dollar’s latest retreat.

The fiscal side? Quiet. Trump’s mega tax bill is limping through Congress, but markets aren’t biting. Long-end yields are napping, swap spreads are locked in, and traders don’t seem fazed—yet. Maybe it’ll take a weak auction or whispers of Powell’s replacement being a certified dove to stir the Treasury pot.

Carry is king again. Low volatility is a green light for risk, and EMFX, where some of the typical laggards, like the MYR, are slicing through key resistance even without juicy yields. That’s a red flag for the dollar — it’s not just losing its own carry yield-seekers, it’s losing trust.

Near-term, this FX trend monster needs more fuel—and today’s macro docket might deliver. The ISM manufacturing report could expose a soft underbelly in U.S. demand. If prices paid fall alongside new orders and employment, it’s another hit to the greenback. Add the JOLTS report, where a surprise downside miss on openings would signal that the labour market—the dollar’s sole bastion—is finally cracking.

Technically, the DXY has broken key support and now clings to a long-term trendline near 96.50, which dates back to 2011. A slip below there, and this bear trend gets teeth.

Eyes now shift to Sintra, where the central bank Avengers—Powell, Lagarde, Ueda, Bailey, and Rhee—share a stage. If Powell even hints at softening his moderately hawkish stance, expect a fresh leg lower for the dollar. EUR/USD already flirted with 1.1800 overnight. Above 1.1900, there’s daylight. But watch the pullbacks—1.1690–1.1720 could offer the real entry point for those still chasing this euro wave.

The dollar’s not just losing altitude—it’s losing relevance. And this time, there’s no single villain. It’s the sum of many frictions: politics, policy, portfolios, and patience. And right now, all of them point one way: lower.

Sintra Summit: Dollar Dilemmas and Fractured Consensus Hang Over Central Bankers’ Hilltop Retreat

As the world’s top central bankers gather this week in Sintra’s postcard-perfect hills, they’re not just comparing notes on rates—they’re confronting the elephant in the global monetary room: is the dollar’s era as king of the financial jungle finally fraying?

On paper, inflation’s back in its cage. But beneath the surface, policymakers are navigating a world where Trump’s tariffs, an increasingly divided Fed, and the unravelling of the post-WWII dollar-based order all loom larger than any dot plot.

Powell will be in the hot seat—again. With the S&P and Nasdaq printing fresh highs and the economy still running hot, he’s held the line against White House pressure. But with Trump circling, talk of an early successor is already undercutting the Fed’s independence. If that credibility breaks, so might the greenback’s global privilege.

Markets are sniffing it out. The dollar’s sunk to near four-year lows against the euro, while euro zone cheerleaders are starting to whisper about a “euro moment.” Lagarde, for once, doesn’t have to defend the euro—she gets to promote it. However, turning the single currency into a true dollar alternative requires more than boasting; it needs a political and fiscal union that Europe still hasn’t mustered.

All told, Sintra 2025 is less about coordinated policy and more about global dissonance. The old playbook—cut, coordinate, calm—is out. What’s in? Cautious improvisation. Each central bank is dancing to its own tempo now, but all are watching the dollar for the next cue.

Because if this is truly the beginning of the end for the dollar's dominance, we’re not just entering a new cycle—we’re entering a new system. And no one’s quite sure what the rules are anymore.

Rice, Steel, and Stubbornness: Japan Stands Its Ground as Trade Clock Ticks

What started as a tariff dispute has turned into a full-blown economic identity crisis. This isn’t about rice or cars—it’s about sovereignty, symbolism, and survival at the ballot box. With the July 9 deadline for a US-Japan trade deal looming, both sides have doubled down. Washington is demanding obedience; Tokyo’s offering deflection and delay.

Japan made it crystal clear—it won’t toss its farmers under the trade bus just to appease Washington’s deficit math. Rice isn’t just food in Japan, it’s political bedrock. Generations of LDP dominance have been fertilized by loyalty from rice farmers, and with domestic shortages pushing prices sky-high, Tokyo’s not about to open the gates to Uncle Sam’s grain trucks.

Trump, never one to miss a pressure point, lit into Japan on Truth Social, blasting their rice restrictions while noting—correctly—that they’re running low on their own supply. But facts don’t trump political calculus. Tokyo will tap its reserves before it sacrifices that vote-rich farming bloc.

Beyond rice, the real battlefield is steel and autos. Tokyo’s been begging for a clean exemption from the blanket 25% auto tariffs and an escape hatch from the looming “reciprocal” levies. But that’s looking less likely by the hour. Trump’s election calculus demands confrontation, not compromise—and he’s zeroed in on Japan’s $63 billion trade surplus like a heat-seeking missile.

And while Japan's auto giants have spent decades building US plants and employing American workers, the narrative from D.C. remains stuck in a 1980s trade deficit time warp. Trump’s gripe is simple: we take your Toyotas, but you won’t take our trucks. Never mind that American cars don’t fit Japanese streets—or preferences.

Meanwhile, Japan’s Prime Minister Ishiba is limping toward a July 20 upper house election with sagging approval ratings and no trade win to show. A deal could buoy his standing, but caving to the US now would amount to political seppuku.

So here we are: a geopolitical standoff dressed up as agricultural policy. Tokyo's not blinking, Washington’s not budging, and the trade clock is ticking. If there’s a deal, it’ll come at the last minute—and it won’t come cheap.