Market Overview
The US dollar is bid and testing resistance levels as market participants await a flurry of central bank commentary at the ECB’s Sintra conference, which commences around 9:00 AM ET and includes remarks from the new Federal Reserve Chair. With the employment report scheduled for tomorrow following Friday’s holiday, traders are positioning ahead of what could be a significant data point, while oil benchmarks have printed marginal new lows since March and Treasury yields have firmed.
United States
The greenback has extended its gains to new 40-year highs against the yen, reflecting broad dollar strength across the currency complex. The US Dollar Index continues to trade near elevated levels as investors digest the implications of the Sintra conference and prepare for tomorrow’s nonfarm payrolls report. Given the new Federal Reserve Chair’s reluctance to provide forward guidance at his first press conference last month, expectations for additional policy signals today appear modest, though any remarks on the economic outlook or inflation trajectory could move markets.
The June nonfarm payrolls report will be released tomorrow, with the median forecast calling for 110,000 to 115,000 positions added. This would represent a recovery from last year’s average of approximately 10,000 jobs per month, suggesting a normalization in hiring dynamics. The employment data carries particular weight given recent softness in labor market indicators and will likely influence Fed policy expectations for the remainder of 2026.
The ADP private sector employment estimate, released today, may prove to be the most impactful of the current data slate. Through May, the private sector averaged 73,000 jobs per month, while the BLS estimate stands at 106,000 pending revisions. The Bloomberg median survey forecast for today’s ADP report is for a 120,000 increase, which would suggest stronger underlying momentum in private hiring than the official figures have captured.
Additional labor market color came from Challenger’s June job cuts estimate, announced earlier today, which showed a 4.5% year-over-year decline compared with a 3.4% increase in May. This suggests employers are moderating their reduction activity, a potentially positive signal for the employment trend.
The final manufacturing PMI will be overshadowed by the ISM manufacturing index release. The manufacturing PMI has increased in five of the first six months of the year, reaching 55.7 in June (preliminary reading), marking a four-year high. The ISM manufacturing index rose in three of the past six months to 54.0, also the highest level in four years, indicating resilience in the manufacturing sector despite broader economic headwinds.
May construction spending will also be reported today. After declining approximately 1.7% in the first two months of the year, construction spending rebounded by a cumulative 0.6% over the past two months. The median forecast calls for a 0.2% increase in May spending, suggesting continued stabilization in this cyclical indicator.
US Treasury yields have firmed, with the 10-year benchmark rising nine basis points yesterday in back-to-back increases over three weeks—the largest single-day rise since mid-May. The 10-year yield bottomed near 4.35% yesterday and is now trading near 4.47%. Despite heavier oil prices, benchmark 10-year yields remain firmer today, with yields rising 2–6 basis points in Japan and the Asia-Pacific region and 2–4 basis points higher in Europe.
Eurozone
The euro has mostly traded inside last Friday’s range of approximately $1.1355 to $1.1435 so far this week. Yesterday, the euro recorded its session high as Europe was closing, which may have been tied to quarter-end positioning. Since moving back above $1.1380 before last weekend, the euro has held above this level throughout the week. Options for approximately 840 million euros at the $1.1375 strike expire today, representing a potential technical pivot point as traders manage expiring positions.
The final eurozone manufacturing PMI drew limited attention, ticking up to 51.4 from the flash reading of 51.3. After rising in the first four months of the year, the eurozone manufacturing PMI pulled back in May and June, suggesting some loss of momentum in the industrial sector. New orders rose, and while they remain elevated, the rise in input costs has slowed, providing some relief on the inflation front.
More importantly for policy considerations, the preliminary June consumer price index came in softer than expected at 2.8%, down from 3.2% and below the 3.0% median forecast in Bloomberg’s survey. The core rate slipped to 2.4% from 2.6%, representing a meaningful decline that has lent credence to the view that after the European Central Bank’s rate hike in June, the institution is seen on hold at the July 23 meeting. That said, the market is confident of a follow-up rate hike in the fourth quarter, with 22.5 basis points currently discounted in forward rates. The softer inflation reading has reduced immediate pressure on the ECB to continue tightening, though the terminal rate expectations remain elevated.
United Kingdom
Sterling has demonstrated constructive price action, recording higher lows and higher highs for the fourth consecutive session yesterday. Cable pushed a couple of hundredths of a cent above $1.3275, marking an eight-day high. The currency is holding below yesterday’s high today and is meeting resistance near yesterday’s settlement level. Yesterday’s low was slightly below $1.3215, with additional support identified around $1.3190. The technical structure suggests a gradual uptrend is taking shape, though resistance remains firm in the near term.
The UK’s final June manufacturing PMI stands at 52.5 rather than the initially estimated 53.1 and the May reading of 53.9. This represents the first decline in three months, suggesting some softening in manufacturing momentum. The manufacturing sector finished the fourth quarter of 2025 at 50.6 and was at 51.0 at the end of the first quarter of 2026, indicating that the recent decline has brought the sector back toward more modest growth levels. The Bank of England’s policy trajectory remains data-dependent, with the softer manufacturing print potentially supporting the case for patience on rate cuts if inflation data continues to improve.
China
The offshore yuan posted its highest settlement in six sessions yesterday, demonstrating some resilience despite the PBOC’s policy signals. The dollar found support ahead of the 20-day moving average at approximately CNH6.7830, which it has not closed below in two weeks. The greenback is trading firmly and is probing the CNH6.80 area today, even though the People’s Bank of China set the dollar’s reference rate at a new four-year low toward CNY6.8067, compared with CNY6.8019 yesterday and CNY6.8195 a week ago. This divergence between the PBOC’s fixing and actual market pricing suggests official efforts to stabilize the currency through guidance while allowing some flexibility in spot trading.
China’s RatingDog manufacturing PMI edged lower to 51.7 in June from 51.8 in May. This index tends to run a little faster than the official PMI, which rose to 50.1 in June from 50.0 in May. The modest improvement in the official PMI, though remaining just above the 50 boom-bust threshold, suggests that manufacturing activity is stabilizing but not accelerating. Policy support from the PBOC and fiscal authorities appears to be providing a floor for economic activity, though the pace of expansion remains subdued.
Japan
The dollar has extended its gains to new 40-year highs against the yen, with the currency pair pressing slightly above JPY162.65 yesterday and staying firm throughout the North American session. The dollar edged up to almost JPY162.85 today and has barely traded below yesterday’s settlement of approximately JPY162.55. Japanese officials have touted their preparedness to act and emphasized close communications with the United States, yet intervention ahead of the US employment report seems minimal. The authorities appear to be adopting a wait-and-see approach, potentially preferring to assess the employment data before considering any direct market intervention.
Japan’s housing starts rose for the first time this year in May but did not even recoup the losses in April. The year-over-year surge of 33.9% reflects the soft patch that hit the sector in the second quarter of 2025, providing a favorable comparison base. More significantly, the final June manufacturing PMI confirmed the improvement to 54.8 from the preliminary estimate of 54.9 and the prior month’s 54.5, indicating sustained strength in the manufacturing sector.
The Q2 Tankan Survey provided more impressive results. Sentiment edged higher, and among large manufacturers, the results appeared to be the best since 2018. Most impressive was the jump in capital expenditure intentions for the fiscal year at 11.5%, compared with 3.3% in the first quarter. This surge in capex intentions suggests that Japanese corporations are gaining confidence in the economic outlook and are willing to commit resources to expansion, a potentially significant development for medium-term growth prospects.
Japan’s 10-year government bond yields rose 2–6 basis points today, reflecting the global trend toward firmer yields and the impact of yen weakness on domestic rate expectations. The Bank of Japan’s policy stance and recent meeting minutes continue to be scrutinized by market participants for any signals regarding the pace of monetary policy normalization.
Canada
The Canadian dollar is chopping near its lowest level since last April. The US dollar stalled slightly shy of CAD1.4250, similar to its behavior last week, suggesting a potential technical resistance zone. Options for almost 500 million Canadian dollars at the CAD1.4260 strike expire today, which may influence intraday trading dynamics as expiration approaches. The key question facing traders is whether this level represents a double top or part of a choppy consolidation that precedes another leg higher. The technical picture is inclined toward the latter interpretation, suggesting that consolidation may be a prelude to further dollar strength.
The next interesting chart area is around CAD1.4300, which would represent a fresh test of recent highs. Canadian economic data, including GDP figures and Bank of Canada policy communications, will be critical in determining whether the loonie can stabilize or whether the greenback continues to push higher. The relative interest rate differential between US and Canadian rates remains a key driver of the currency pair.
Australia
The Australian dollar posted a potential key reversal yesterday by making a new low for the move and then recovering to settle above Monday’s high. The currency approached but held above the 200-day moving average at approximately $0.6865 today and has not traded below this level since last November, suggesting this moving average is acting as significant support. The next technical target is identified in the $0.6950–$0.6975 area, representing a potential resistance zone for rallies.
However, there has been no follow-through buying today, and the aussie has been pushed back to slightly below $0.6885 today. Given the position of intraday momentum indicators, the low may not be in place for the day, suggesting further volatility is likely. That said, re-establishing a foothold above $0.6900 would help stabilize the tone and support the case for a continued recovery toward the $0.6950–$0.6975 target zone.
Australia’s manufacturing PMI ended last year at 51.6, rose to 52.3 in January, but has declined to 51.5 in June following three rate hikes by the Reserve Bank, which is a little better than the preliminary estimate of 51.2. Separately, building approvals were 1.1% in May after a revised 0.2% decline in April, initially reported as a 3.4% decline. The RBA’s policy stance and recent meeting minutes continue to be assessed by market participants as the central bank balances inflation concerns against growth considerations. Private credit data will also be monitored for signs of credit demand and economic activity.
Emerging Markets
The Mexican peso continued to consolidate yesterday, with the dollar scratching below last Friday’s low of approximately MXN17.43 but settling firmly below MXN17.50. The greenback has risen to almost MXN17.5475 today, with nearby resistance identified around MXN17.56 to MXN17.5850. Mexico has a full slate of reports today that could influence the peso’s trajectory.
Worker remittances, the number one source of hard currency for Mexico, are expected to have rebounded to around 5.56 billion dollars in May from 4.98 billion dollars in April. In the first four months of the year, worker remittances totaled 19.5 billion dollars compared with 19.02 billion dollars in January–April 2025. While some real sector data have shown that the Mexican economy likely stabilized recently after contracting 0.6% quarter-over-quarter in the first quarter, the June manufacturing PMI and IMEF surveys are expected to have remained below the 50 boom-bust levels, suggesting continued softness in industrial activity.
The Colombian central bank surprised the market yesterday with a 75 basis point rate hike, bringing the policy rate to 12%. The central bank cited the tight labor market and above-target inflation at 5.8% in May as justification for the aggressive move. This represents the first increase since March and follows a court ruling that blocked the government from interfering with the rate decision, suggesting the central bank has regained independence in its policy deliberations. The Colombian peso rallied 1% yesterday and has risen 10.5% in the first half of 2026, leading emerging market currencies higher and reflecting market confidence in the central bank’s inflation-fighting credentials.
The Indian rupee fell for the third consecutive session today, posting a 0.6% loss despite the central bank’s intervention efforts, marking the largest single-day decline since June 8. The dollar rose to INR95.2925, its highest level since June 12, suggesting that capital outflows or broader risk-off sentiment may be overwhelming official support efforts. The rupee’s weakness reflects broader emerging market pressures and the relative attractiveness of dollar-denominated assets in the current environment.
Global Markets
Most of the large equities markets finished the second quarter on an up note, with last week’s five-day decline in the S&P and Nasdaq kindling new buying interest. The S&P 500 slipped approximately 1% last month, while the MSCI Asia Pacific Index fell a little more. Europe’s Stoxx 600 rose by approximately 2.5%, outperforming other major indices. Today, the large bourses in the Asia-Pacific region are mixed, while Europe’s Stoxx 600 is slightly heavier after gaining almost 0.9% yesterday. US index futures are around 0.25%–0.50% lower, suggesting a modest pullback in early US trading.
Gold recovered from its lowest level since last November at approximately $3,943 yesterday and settled near $4,008. The precious metal is consolidating today, having held below $4,020 and above $3,960. A move above $4,100 would help stabilize the technical tone and potentially signal a sustained recovery. The gold market remains sensitive to real interest rate expectations and currency movements, particularly dollar strength.
Silver’s price action was stronger than gold, recording an outside up day by trading on both sides of Monday’s range and settling above its high. Yet it failed to close above $60 despite the intraday penetration and retreated to slightly below $57.20 today, suggesting that resistance at the $60 level remains formidable. The technical picture for silver remains constructive on a longer-term basis, though near-term consolidation appears likely.
August WTI crude traded on both sides of Monday’s range yesterday, and although it settled inside Monday’s range, the technical tone looks poor. The consolidation within last Friday’s range of approximately $68.55 to $71.85 looks to be some kind of continuation pattern. Indeed, it has slipped to a marginal new low since March today, almost $68.20. Recall that before the war, the contract settled at $65.70, providing historical context for current price levels. September Brent has similarly made marginal new lows since March today, reflecting global crude oversupply concerns and weakness in energy demand expectations. The consolidation in crude suggests that a breakout, either higher or lower, may be imminent, and traders should monitor inventory data and geopolitical developments closely.
