USD’s slide, Gold’s hesitation, and the S&P’s surge — Signs of a new capital order

Highlights:

• USD Index (DXY) slips near multi-month lows around 103
• Gold remains oddly stagnant despite safe-haven logic
• S&P 500 hits all-time highs, attracting global liquidity
• Economic data from US, EU, China, and Japan signal divergence
• Upcoming: US NFP, CPI, FOMC minutes, and UK GDP to test the trend

The Dollar’s decline: A repeat of 2002 or something new?

We are on the eve of the first week of July, 2025, forex is in turmoil: the U.S. dollar is declining – and not in a crash, but on a gradual persistent descent. The DXY is sitting around 96 down off of its 2024 highs of 110. This is not merely racket. It is trading too close to what happened in the 2002 to 2003 cycle, which was the post-tech bubble easing and twin deficits which triggered a long-term dollar retreat.

However this time it is not the panic due to which the dollar is falling. It is declining even though there has been an encouraging strength in U.S. employment statistics. Consider this:

• Chicago PMI (June): 40.4 down to below 50 the 3rd month in a row
• ISM Manufacturing PMI (July 1): 49.0 – remains negative
• Construction Spending: -0.3 percent in June
• ADP Jobs (July 3): -33K — that is a shocking figure... down by 99K vs. estimate
• Unemployment Rate (July 5): Inched up to 4.1%

This is however complicated by the increase in job openings (JOLTS) to 7.77 million. Include Fed Chair Powell on July 2, who gave a tone of caution, but not outright hawkishism, and you have a market interpretation between the lines: the Fed is likely to reduce the rates before Q4 2025.

Gold’s puzzle: Where’s the rush?

Historically, a falling dollar brings a gold rally. Not this time. Gold has been stuck in a narrow band around $2,300–$2,350, even as inflation concerns persist.

Why? The answer may lie in what happened in 2013–2014—when gold corrected sharply after taper talk and capital moved into U.S. equities. We might be witnessing a similar story. With the S&P 500 making new highs, investors are seeking yield and innovation, not safety.

S&P 500: Rational exuberance?

The equity rally isn’t random. Despite shaky manufacturing data, markets are forward-looking:

• AI-driven productivity optimism
• Mega-cap tech earnings surprises
• Q2 earnings remain significant, if not exciting
• US economy, even if slowing, is still outperforming Europe, Japan, and China

On July 6, the S&P 500 broke into uncharted territory. Compared to German factory orders (-1.4%), UK construction PMI (48.8), and Eurozone retail sales (-0.8%), the US looks like a beacon of capital security. This explains why money is moving not just from gold—but also from global currencies into US stocks.

Currencies around the world: Not all created equal

GBP/USD and EUR/USD have risen modestly. Recent data supports this:

• UK Final GDP (Q1) held at 0.7%
• Eurozone Core CPI remains sticky at 2.3%
• German CPI (June) flat at 0.0%, but PPI plunged -0.6%

However, structural problems remain: German unemployment rose (+11K), and French industrial output fell -0.5%.

JPY, despite positive Tankan Survey sentiment (Non-Manufacturing Index: 34), remains weak due to yield differentials and cautious BoJ.

CNY shows signs of stabilization. The Caixin Manufacturing PMI (50.4) was a surprise return to expansion, and if Chinese growth firms up, EM currencies may gain traction in H2 2025.

The road ahead: Tectonic or temporary?

The week of July 8–12 could reshape sentiment entirely:

• July 10: US CPI and FOMC minutes—a hawkish surprise could jolt the dollar
• July 11: UK GDP, German CPI, and French inflation data
• July 12: US Federal Budget Balance and Canadian jobs report
• BRICS Summit (July 6–7): Could include discussion on de-dollarization or new commodity-backed settlements

Add in BoE, ECB, and BoJ speakers across the week, and the picture becomes one of flux.

Conclusion: A new forex order in the making?

We are not merely watching a soft patch in the dollar. We may be witnessing a structural capital reallocation—where traditional correlations are breaking:

• Gold doesn’t rise when the dollar falls
• Equities surge as macro weakens
• The dollar is not just on the run, but on tests on relative fiscal credibility

This may signal the early stages of a new forex regime: not just geopolitical headlines and central bank statements—but on global trust in innovation, capital efficiency, and operational resilience.