The dollar is trading lower against all of the G10 currencies ahead of the US employment report. The softer ADP private sector estimate seems to have encouraged some paring of long dollar positions ahead of tomorrow’s US holiday. The yen is the strongest, up nearly 0.75% against the greenback. This does not appear to be a result of intervention. Instead, it likely reflects the nervous and extended positioning. The dollar fell to JPY160.90 in early European turnover and is now near JPY161.40. The US formally refused to renew the USMCA. This opens the process to annual reviews for the next decade unless a party withdraws. The immediate market impact appeared minimal.
The focus is on the US employment report. After a poor 2025, when the US created an average of 10k jobs a month, there has been recovery this year. Through May, US has created about 114k jobs a month this year. Fed Chair Warsh, who eschews forward guidance, said at the ECB’s Sintra gathering that inflation expectations have eased in recent weeks. The University of Michigan’s consumer inflation expectations for 5-10 years did slip from the preliminary June estimate, and of course, oil and gasoline prices have fallen. Still, coming into today’s jobs report, the Fed funds futures are discounting almost 35 bp of tightening this year.
Prices
G10
• The euro weakened yesterday, and low was made as Fed Chair made it clear he was not going to offer any guidance on interest rates. It reached a low for the week, near $1.1360, before it rebounded to around $1.1410. Sellers pounced on it and drover the euro back to $1.1380. It has come back firmer now, ahead of the US jobs report, but this week has largely remained with last Friday’s range (~$1.1355-$1.1435). There are options for nearly 2.9 bln euros at $1.1450 and 2.4 bln at $1.14 that expire 90 minutes after the employment report.
• The yen jumped in late Asia Pacific time and extended its gains into early European turnover, but it does not appear to be intervention but nervousness about the risk of intervention after today’s US jobs report. The greenback settled yesterday slightly below JPY162.60 and hardly spent any time above there today and fell to about JPY160.90 today. It traded below the 20-day moving average (~JPY161.10) for the first time since last October. There are nearly $1 bln of options struck at JPY161.00 that expire today.
• For the sixth consecutive session, sterling is recording higher lows and higher highs today. It surpassed the (38.2%) retracement (~$1.3340) of the decline since the early May 1 high (~$1.3660). The next retracement is near $1.3400, where the 200-day moving average is also found. With today’s gains, sterling also met the minimal objective of the bottoming pattern carved in the second half of June.
• The US dollar continues to consolidate against the Canadian dollar. It remained within Tuesday’s range (~CAD1.4180-CAD1.4250). A move above CAD1.4250 targets the CAD1.4300 area. It takes a break of CVAD1.4170 to suggest the consolidation is a topping pattern. There are about $1.7 bln of options struck between CAD1.4200 and CAD1.4225 that expire today.
• After posting an ostensibly bullish key reversal on Tuesday, the Australian dollar disappointed yesterday. It traded softly within Tuesday’s range yesterday and continues to trade quietly and uninspiringly today. The Aussie is in around a $0.6885-$0.6910 range. Still, a foothold above $0.6930 would lift the technical tone.
EM
• The Mexican peso fell yesterday but it did not seem to be related to the US not agreeing to renew USMCA. It is consolidating near yesterday’s lows today. The US decision opens the process up to annual reviews, while keeping the agreement itself, which was negotiated in President Trump’s first term, in place for another 10-year if no one pulls out. There were only two emerging market currencies that appreciated yesterday, the Colombian peso, following the 75 bp rate hike on Tuesday, and the Russian rouble. Brazil, the other major Latam currency was the weakest among emerging market currencies. It fell by about 0.7%, around twice as much as the Mexican peso. The latest polls for the October contest show President Lula are still well ahead of his closest rival, Flavio Bolsonaro, the son of the former president.
• While the dollar is consolidating against the offshore yuan, the PBOC has resumed its gradual guidance for a stronger yuan. Recall that in six of the seven sessions before Tuesday, the end of the month/quarter/half, the PBOC had set the dollar’s reference rate higher in contrast to the general trend. Although such action around the year-end or H1 25 end is not immediately evident, such considerations may have been at work. In any event, the PBOC set the dollar’s fix at a new three-year low yesterday (CNY6.8067) and CNY6.8088 today. The yuan’s roughly 3% gain year-to-date may seem like small beer for dollar-centric views but consider its appreciation against all the regional currencies: around 10% against the South Korea won, nearly 9% against the Indian rupee, around 6.5% against the yen. The yuan has also appreciated by more than 6% against the euro, almost 8.5% against the Swedish krona, and 6.5% against the Canadian dollar. It has risen against all of Latam currencies but the Colombian peso and Brazilian real.
• The Indian rupee extended yesterday’s losses and fell to a two-and-a-half week low, despite some reports that suggest intervention in the offshore market. The dollar reached INR95.3960 and settled near session highs.
Other Markets
• The heavier tech sector in the US yesterday took a toll on Asia Pacific equities today. The Nikkei fell almost 2.5%, China’s CSI 300 dropped 3%, while South Korea’s Kospi got tagged for almost 8%. The MSCI Asia Pacific Index fell for the first time in three sessions. Europe’s Stoxx 600 is up about 0.5% and is recouping yesterday loss. US Nasdaq futures are almost 0.5% lower, and the S&P and Dow futures are narrowly mixed.
• Bonds are selling off. The 10-year JGB yield jumped almost eight basis points to a three-month high. European benchmark yields are mostly 4-5 bp higher, while the US 10-year Treasury is a little more than a basis point higher to knock om 4.50%.
• Gold was more animated yesterday. After holding above Tuesday’s low (~$3943), gold was lifted to ~$4115, a five-day high. It was unable to sustain the momentum and gold pulled back to Tuesday’s high (~$4063). It is consolidating today between about $4030 and $4080.Silver reached a five-day high a fraction of a cent above $61. It is consolidating today between about $58.60 and $60.40.
• Yesterday was the first session since January that the August WTI contract traded entirely below the 200-day moving average (~$70.25 today). It has extended its losses and reached $67.30 today. The day before the war began, the August contract posted a high of about $66.30. The following day, it did not trade below $66.95. The gap remains.
Data
• Due to tomorrow’s holiday, the US June employment data will be reported today. US jobs’ growth slowed to an average of 10k a month in 2025, but it has rebounded to around 114k in the first five months of the year. The median forecast in Reuters and Bloomberg surveys is around 110k increase in June. The unemployment rate is expected to be steady at 4.3%, while average hourly earnings may tick up to 3.5% from 3.4% (which lags behind CPI and PCE deflator). The recovery of the labor market removes a powerful argument for the Fed’s doves and helps explain the hawkish hold in June. Ahead of today’s data, the futures market has 34 bp of tightening discounted for this year compared with about 14 bp at the end of May.
• Canada’s manufacturing PMI reached a new cyclical high in April (53.3) before pulling back in May (52.9). It was below the 50 boom/bust level from February 2025 through the end of the year. It has not been below 50 this year. More often than not in recent weeks, Canadian data has surprised on the upside, and the soft patch seen in Q4 25 and Q1 26 may be ending.
• Eurozone unemployment was steady at 6.2% in May after April was revised to 6.2% from 6.3%. This matched the record low under monetary union seen in 2024 at 6.2%. Despite the weak growth (-0.2% in Q1 quarter-over-quarter and maybe 0.1% growth in the quarter that just ended), it is impressive how well the aggregate labor market has fared. Still, we suspect there is little chance of a follow-up hike this month after the hike in June.
• For the last few years, Australia’s goods trade balance has been trending lower. Consider that the 12-month moving average peaked in March 2022 (~A$14.48 bln) and is now near A$2.4 bln. In the first five months of the year, it averaged about A$820 mln compared with A$4.12 bln in the Jan-May 2025 period. Unexpectedly, Australia reported a A$3.02 bln May trade deficit today. Exports dropped 6.9% month over month, while imports rose by nearly 3%. It is the second monthly trade shortfall this year and the largest since 2025. Australia spent a record A$8.6 bln to buy fuels and lubricants in May and the AI build out requires imports of equipment. Gold exports fell by more than A$2 bln, while the value of natural gas exports declined.
Reviewed by Marc Chandler
on
July 02, 2026
Rating:
