### United States
With a new US-Japanese deal on the table and an ongoing tariff truce between the US and China, perceptions of reduced tail risks in US foreign economic policy have boosted market confidence, driving equity prices higher. The dollar remains mixed in response. Weekly jobless claims in the US are anticipated today, continuing a five-week declining trend, marking the longest short-term improvement since late 2022. However, attention is on next week’s non-farm payroll report, expected to show a slowdown in job growth (~115k compared to 147k in June) and a slight uptick in the unemployment rate (4.2% vs. 4.1%). Additionally, new home sales and preliminary PMI data are due, with expectations that the manufacturing PMI might dip for the first time since March, while the services PMI could partially recover from a 0.8% drop in June. The Dollar Index fell below 97.20 but stabilized around 97.40 later in the European morning.
### Eurozone
The euro has shown resilience, hitting a 12-day high at $1.1780, driven by hopes for a trade deal. The July flash PMI slightly improved, with the manufacturing sector still contracting, if slowly (49.8 vs. 49.5). This marks the seventh consecutive increase, although it hasn’t exceeded 50 since early 2022, post the invasion of Ukraine. Services are picking up with a 51.2 reading, the strongest since January. Germany saw a minor shift in composite PMI to 50.3, with French PMIs remaining below 50. An ECB meeting looms, but policy changes are unlikely. The market does not foresee a significant policy shift until after the December meeting.
### United Kingdom
After a brief rally to nearly $1.3585, sterling has faced some setbacks. Preliminary July composite PMI registered the first decline in three months to 51.0 from 52.0. Manufacturing PMI rose to 48.2, marking a four-month increase, while the services PMI declined to 51.2. Despite PMI trends, monthly GDP figures for April and May contracted, indicating a minimal growth forecast for Q2. Sterling remains volatile with support near $1.3515-20.
### China
The PBOC’s daily dollar fixing has become a focal point, adjusted lower and marking the weakest since last November. Exporter repatriation in a weaker dollar environment has influenced exchange dynamics, with banks selling yuan and acquiring dollars. Recently, the offshore yuan recorded a new low against the dollar, touching CNH7.1440 before recovering. The PBOC’s exchange rate management continues to be a closely watched move in the market, amid global dynamics.
### Japan
The US dollar saw a downward movement to nearly JPY146.10, testing around JPY145.95. A key trade agreement has reduced reciprocal and auto tariffs from 25% to 15%, and a $550 billion direct investment agreement is noted, marking significant FDI commitments. Japanese PMIs remain stable, with July’s composite at 51.5. Manufacturing dipped below 50 again, while services jumped to 53.5, echoing strong February performance.
### Canada
The US dollar recovered against the Canadian dollar after dropping to near CAD1.3575, which was a recent low. Canada expects a retail sales report today; May sales are anticipated to show a notable decline, the largest since May 2024. Despite front-loading rate cuts, no changes are anticipated at next week’s Bank of Canada meeting.
### Australia
Recent developments have propelled the Australian dollar to new yearly highs at $0.6625. The PMI data has been supportive, with July figures showcasing a rise to a composite high of 53.6, along with a manufacturing boost to 51.6. Central bank governor Bullock’s comments on a “measured and gradual” easing approach indicate some caution. Markets anticipate a rate cut in upcoming meetings.
### Mexico
Anticipation surrounds the upcoming CPI report for mid-July, expected to show a third consecutive year-over-year decline and potentially the first sub-4% reading since April. A rate cut is expected before the end of the year. The peso continues to strengthen, reaching a new low for the year against the dollar, amid strengthening Latam currencies, which recently topped emerging market performers.
