The dollar begins the new week on a firm note despite the disappointing employment report last week, but except against the yen, it remains within recent ranges. Japanese official rhetoric has not increased and the sell-off in JGBs seemed to add to the weight on the yen. The dollar rose to JPY162.40, a yen higher than it settled before the weekend. The yen is off about 0.6% late in the European morning. Of the G10 currencies, the New Zealand dollar is off almost as much even though its central bank is likely to hike is key rate in the middle of the week.
OPEC+ agreed to boost output and oil prices are a little softer. Yet, the Norwegian krone is only G10 currency that is not falling against the US dollar today. French budget problems saw its 10-year premium over Germany widen to nine-month highs last week (~80 bp) but is flat today. ECB President Lagarde apparently is mulling re-entering French politics, where the National Front candidates are running ahead on the pols for next year’s contest. After the US jobs data last week, the Fed funds futures are now pricing in a Fed hike at end of the year rather than in October.
Prices
G10
• With US markets closed before the weekend, the euro consolidated the gains scored in the wake of the disappointing US jobs data on July 2. On Friday, it held above $1.1420 but could not rechallenge the $1.1475 area that had capped it the day before. The 20-day moving average is near $1.1465 today and the single currency has not settled above it since June 16, the day before the Fed delivered its hawkish hold. The euro is trading with a heavier bias, and it has held below $1.1450 where options for 1.25 bln euros expire today. Support is seen near $1.1400 were options for almost 1.8 bln euros expire today.
• The dollar slipped through Thursday’s low briefly before the weekend and traded a tick below JPY160.50, its lowest level since the day after the FOMC meeting. Still, it rebounded and settled near JPY161.30. The greenback has bounced back to around JPY162.30 today. Recall that last week’s high was near JPY162.85. Options for $1.8 bln at JPY162 expire tomorrow. Despite the BOJ’s regular bond buying operation today, the 10-year JGB reached a new 30-year high near 2.82%.
• Sterling did not see follow-through buying ahead of the weekend, after reaching $1.3385 after the US employment report last Thursday. The $1.3400 area holds the 200-day moving average and the (50%) retracement objective of the decline since the May 1 high (~$1.3660). The 5-day moving average has crossed above the 20-day moving average today for the first time since mid-May. But sterling is trading with a slightly heavier bias as it holds in the upper end of last Thursday’s range. Initial support is now seen around $1.3320.
• The Canadian dollar spent Friday trading within the range set the previous session. However, the consolidation still looks constructive for the greenback, which settled above CAD1.4200. The US dollar is pushing near CAD1.4230 in the European morning. There have been two highs recently, just shy of CAD1.4250. A move above there could spur the next leg up toward CAD1.4300.
• The Australian dollar snapped a four-week slide with a gain of almost 0.60% last week. It reached $0.6950 before the weekend, its best level in eight sessions, and the (38.2%) retracement of the losses since mid-June. It is consolidating quietly today between about $0.6920 and $0.6950. The next retracement and the 20-day moving average are around $0.6975.
EM
• After falling to nearly MXN17.4180 before the weekend, the greenback recovered to around MXN17.49 in subdued turnover. The Mexican peso reached its best level since June 24. It is not clear if the consolidative phase is complete. For that, the dollar must fall below the MXN17.35-MXN17.40 area. The greenback is consolidating between MXN17.46 and MXN17.4930 so far today.
• The dollar fell to a new low for the week against the offshore yuan, near CNH6.7810 ahead of the weekend. But the dollar is better bid today and it is approaching CNH6.80 in Europe. Initial resistance is seen in the CNH6.8050 area. Before the weekend, the PBOC set the dollar’s fix at CNY6.8047, a new three-year low. Today’s fix was set at CNY6.8066.
• The Indian rupee snapped a four-day slide ahead of the weekend. The dollar reached nearly a three-week high before the US jobs data (~INR95.3960) and eased to about INR95.1640 before the weekend. The rupee came under new pressure today and the dollar reached almost INR95.4840, the highest since June 11.
Other Markets
• Equities finished last week on a strong note. All of the large Asia Pacific markets rallied on Friday, with South Korea’s Kospi leading with a 5.75% gain. Japan, Hong Kong, and Australia’s main indices gained more than 1%. Europe’s Stoxx 600 edged up by about 0.65% to bring the fourth consecutive weekly rise to about 2.65%. US S&P and Nasdaq futures traded higher before the weekend. Today is a different story. Japan, Hong Kong, and Indian stocks advanced but most of the large bourses in the region did not and South Korea’s Kospi could not hold its early gains. The Stoxx 600 is nursing a small loss. US index futures are trading firmly.
• Benchmark 10-year yields rose on Friday and extended last week’s rise. The 10-year JGB rose by 14 bp (to 2.77%), while most European yield increased by 7-12 bp, with Italian rates rising the most. The 10-year US Treasury yield rose 11 bp to 4.48%. Outside of the jump in JGB yields, benchmark rates are mostly softer today. We note that China’s two-year yield slipped a couple of basis points to 1.22%, the lowest since February 2025. The US 10-year yield is off a little more than two basis points to almost 4.45%. The US Treasury will sell $119 bln of coupons this week.
• Before the weekend, gold settled above its 20-day moving average (~$4156) for the first time since mid-May. The yellow metal reached a new two-week high today, near $4203 before reversing lower. It fell slightly through $4137. Nearby support is seen around $4120. Silver has a four-day rally into tow as it entered today’s activity. It rose by more than 2.5% in each of the last two sessions. The pre-weekend high was slightly shy of $62.90, its best level since June 23. It tested the 20-day moving average today, around $63.25, but was turned back. Silver has not settled above the 20-day moving average since May 25. Support now may be seen around $60.60.
• August WTI was little changed before the weekend. It fell to almost $67 on July 2. It settled on its highs and follow-through buying on July 3 and lifted it to about $69.25, the five-day moving average. The 200-day moving average is near $70.35, and since breaking below it last Tuesday, the August WTI contract has settled above it. It is trading between about $67.80 and $69.25 today.
Data
• The final US June services and composite PMI hold little new news. The June ISM services survey will draw more attention. Activity is expected to edge lower and prices paid are expected to have eased. New orders likely remained strong.
• Canada sees its services and composite June PMI. In May, the composite rose for the fourth consecutive month and crossed above 50 for the first time since last October. The Bank of Canada’s Q2 business outlook will also be released today.
• Brazil reports June trade figures. Through May, the trade balance has averaged $6.53 bln a month compared with $4.87 bln average in the first five months of 2025.
• The eurozone reported that May producer prices rose 0.2% (0.7% in April) for a year-over-year rate of 5.9% (5.0% in April). Also, it reported that May retail sales rose 0.2% (-0.3% in April) for a 1.6% year-over-year advance (0.9% in April).
• Germany reported a 1.9% rise in May factory goods ordered after the outsized 3.2% (initially -3.8%) drop in April. Transportation equipment, including for the military, helped flatter today’s report. Industrial output is due tomorrow. It is expected to have eked out a 0.1% gain after it rose 0.4% in April. Separately, the June construction PMI edged up for the first back-to-back increase this year but continued to languish in its trough. It was above 50 last year only in December. It was at 42.4 in May and edged up to 44.8 in June.
• The UK’s construction PMI held below 40 for the second consecutive month. It is at 38.4 (from 38.2 in May, the lowest since the pandemic. It has not been above 50 since the end of 2024.
• Australia’s Melbourne Institute’s Inflation gauge fell by 0.4% in June (-0.3% in May) for a year-over-year pace of 3.9% (4.4% in May). The central bank recently expressed concerns about the elevated inflation expectations, but the broadening of house price declines may become more salient. Note that Reserve Bank of New Zealand meets on Wednesday, and the swaps market favors a hike with around three-quarters of it discounted.
Reviewed by Marc Chandler
on
July 06, 2026
Rating:
