United States
The greenback begins the new trading week on a resilient footing despite last week’s disappointing employment report, maintaining its recent trading ranges across most currency pairs. The shift in monetary policy expectations has been substantial: Fed funds futures have repriced to now favor a rate hike at year-end rather than in October, a meaningful recalibration following the softer-than-expected jobs data released on July 2. This repricing reflects growing uncertainty about the near-term trajectory of monetary policy and suggests that market participants are reassessing the timing of potential policy adjustments.
The US dollar index continues to demonstrate underlying strength, though the greenback’s advance has been selective in nature. Against most G10 currencies, the dollar remains confined within recent trading ranges, suggesting that while the broad dollar tone remains constructive, there is limited directional conviction at current levels. The broader currency market appears to be in a consolidative phase as traders digest the implications of the employment data for the Federal Reserve’s policy path.
Looking ahead to the data calendar, market participants will focus on the final US June services and composite PMI readings, though these are expected to hold limited surprises. The June ISM services survey will command more attention from traders, with expectations for activity to edge slightly lower while prices paid are anticipated to have eased. New orders are likely to have remained robust, providing some offset to any weakness in the headline activity measure. Additionally, the Treasury Department will conduct a substantial coupon auction this week, with $119 billion in securities scheduled for sale, which could influence yields and broader market dynamics.
Eurozone
The euro consolidated its gains from the wake of the disappointing US jobs data on July 2, with the single currency holding above the $1.1420 level on Friday but unable to rechallenge the $1.1475 area that had capped the previous day’s trading. The 20-day moving average resides near $1.1465 today, and notably, the euro has not settled above this technical level since June 16, the day immediately following the Federal Reserve’s hawkish hold decision. This technical resistance represents a meaningful hurdle for further euro appreciation.
The euro is trading with a notably heavier bias as it consolidates within recent ranges. Significant option expiries are influencing price action: there are 1.25 billion euros in options expiring at the $1.1450 level where the single currency has held below, and approximately 1.8 billion euros in options expiring near $1.1400, which provides support in that area. These option barriers are likely to contain near-term price volatility and establish trading parameters for the session.
On the data front, the eurozone reported that May producer prices rose 0.2% on a monthly basis, a substantial deceleration from the 0.7% increase recorded in April, translating to a year-over-year rate of 5.9% compared with 5.0% in the prior month. May retail sales increased 0.2% monthly after declining 0.3% in April, with the year-over-year pace accelerating to 1.6% from 0.9% previously. These figures paint a mixed picture of economic momentum in the eurozone.
Germany reported a robust 1.9% rise in May factory goods orders following the outsized 3.2% rebound in April (initially reported as a -3.8% decline). Transportation equipment, notably including military-related orders, provided substantial support to the headline figure. Industrial output data is due tomorrow and is expected to eke out only a 0.1% gain after rising 0.4% in April, suggesting underlying manufacturing momentum may be moderating. The June construction PMI edged up for the first back-to-back increase of the year, though it continues to languish in depressed territory at 44.8 in June, up from 42.4 in May. This sector remains well below the 50 expansion threshold, with the index having traded above 50 only in December of the prior year.
Political uncertainty continues to weigh on French assets, with ECB President Lagarde reportedly mulling re-entry into French politics amid polling that shows National Front candidates running ahead in next year’s contest. French budget concerns saw the 10-year yield premium over Germany widen to nine-month highs of approximately 80 basis points last week, though the spread has stabilized today, suggesting a temporary relief in fiscal risk premium.
United Kingdom
Sterling failed to generate follow-through buying momentum ahead of the weekend despite reaching $1.3385 immediately after the US employment report last Thursday. The $1.3400 area holds both the 200-day moving average and the 50% retracement level of the decline since the May 1 high near $1.3660, making this a technically significant zone. The 5-day moving average has crossed above the 20-day moving average for the first time since mid-May, a potential bullish technical signal, though cable remains trading with a slightly heavier bias as it consolidates in the upper end of last Thursday’s range.
Initial support for sterling is now established around $1.3320, providing a floor for near-term consolidation. The technical picture remains mixed, with the currency having achieved a meaningful bounce from the May decline but facing resistance at key moving averages and retracement levels that suggest caution about further immediate gains.
The UK construction PMI has provided disappointing data, holding below 40 for the second consecutive month at 38.4, marginally improved from May’s 38.2 reading which represented the lowest level since the pandemic. The sector has not traded above the 50 expansion level since the end of 2024, indicating sustained weakness in the construction industry despite tentative signs of stabilization.
China
The offshore yuan experienced significant weakness before the weekend, with the dollar falling to nearly CNH6.7810 before rebounding strongly today to approach CNH6.80 in European trading. Initial resistance is positioned in the CNH6.8050 area. The People’s Bank of China set the dollar’s fixing at CNY6.8047 before the weekend, marking a new three-year low, while today’s fixing was set at CNY6.8066, showing a modest weakening bias in the official rate.
The Chinese currency weakness reflects broader concerns about economic momentum and capital flows. The fact that the PBOC has been setting successively lower fixings (in CNY terms, meaning a stronger yuan) suggests official comfort with yuan appreciation, though offshore rates have proven more volatile. The consolidative price action between CNH6.7810 and CNH6.80 suggests traders are assessing the sustainability of recent yuan strength and the implications for Chinese monetary policy.
Market participants should note that China’s two-year yield slipped a couple of basis points to 1.22%, the lowest level since February 2025, indicating easing expectations in the near-term policy outlook and potential deflationary pressures in the Chinese economy.
Japan
The Japanese yen has faced sustained selling pressure despite the lack of increased official rhetoric from Japanese authorities, with the greenback surging to JPY162.40, approximately one yen higher than its pre-weekend settlement. The yen is off approximately 0.6% in late European morning trading, representing a notable decline for the session. The sell-off in Japanese government bonds appears to have added additional weight to the yen, as higher JGB yields typically attract international investors and support currency appreciation, but the actual outcome has been the reverse.
The dollar briefly slipped through Thursday’s low before the weekend, trading a tick below JPY160.50, its lowest level since the day after the FOMC meeting, but rebounded sharply to settle near JPY161.30. The greenback has bounced back to around JPY162.30 today, with last week’s high established near JPY162.85. Significant option expiries of $1.8 billion at JPY162 are scheduled to expire tomorrow, which may influence price action as traders position ahead of these barriers.
Despite the Bank of Japan’s regular bond buying operation conducted today, the 10-year JGB reached a new 30-year high near 2.82%, representing a substantial move higher in yields. This aggressive JGB rally has been one of the most significant market moves of the week, with the 10-year yield rising 14 basis points on Friday alone to 2.77%. The combination of higher JGB yields and continued yen weakness suggests that traditional safe-haven flows are not supporting the currency, a notable divergence from historical patterns.
The sustained yen weakness despite rising yields and without increased official intervention rhetoric raises questions about capital flows and the effectiveness of verbal guidance from Japanese authorities. Traders should remain alert to any signals of potential intervention, as the yen’s weakness could eventually prompt official action if deemed excessive by authorities.
Canada
The Canadian dollar spent Friday consolidating within the range established in the previous session, though the consolidation pattern continues to favor the greenback, which settled above CAD1.4200. The US dollar is pushing near CAD1.4230 in European morning trading, with two recent highs just shy of CAD1.4250. A move above this level could potentially spur the next leg higher toward CAD1.4300, establishing a new range for the loonie.
Canada’s economic calendar includes June services and composite PMI data today. In May, the composite index rose for the fourth consecutive month and crossed above 50 for the first time since last October, suggesting nascent momentum in the services sector. The Bank of Canada’s Q2 business outlook survey will also be released today, providing insights into business sentiment and investment intentions going forward. These data points will be important for assessing the trajectory of Canadian economic momentum and potential implications for monetary policy.
Australia
The Australian dollar snapped a four-week losing streak with a gain of almost 0.60% last week, reaching $0.6950 before the weekend, its best level in eight sessions and representing the 38.2% retracement of the losses accumulated since mid-June. The aussie is consolidating quietly today between approximately $0.6920 and $0.6950, with the next retracement level and the 20-day moving average positioned around $0.6975.
Australia’s Melbourne Institute Inflation gauge fell by 0.4% in June after declining 0.3% in May, with the year-over-year pace moderating to 3.9% from 4.4% in May. This significant deceleration in the inflation gauge suggests that price pressures may be easing, though the Reserve Bank of Australia has recently expressed concerns about elevated inflation expectations. Notably, the broadening of house price declines may become an increasingly salient consideration for policy makers, potentially supporting a more dovish stance.
Emerging Markets
The Mexican peso has demonstrated resilience against the greenback, with the dollar falling to nearly MXN17.4180 before the weekend and recovering to around MXN17.49 in subdued turnover. The Mexican peso reached its best level since June 24, reflecting underlying strength in the currency. The consolidative phase remains unclear, and traders will need to see the dollar fall below the MXN17.35-MXN17.40 area to confirm a reversal of the recent uptrend. The greenback is currently consolidating between MXN17.46 and MXN17.4930 today, suggesting a narrow trading range.
The Indian rupee snapped a four-day losing streak ahead of the weekend after the dollar had reached nearly a three-week high of approximately INR95.3960 ahead of the US jobs data. The rupee eased to about INR95.1640 before the weekend but came under renewed pressure today as the dollar reached almost INR95.4840, the highest level since June 11. The rupee remains vulnerable to broader dollar strength, and traders should monitor capital flow dynamics and Reserve Bank of India policy signals.
Brazil reported June trade figures, with the trade balance averaging $6.53 billion monthly through May compared with a $4.87 billion average in the first five months of 2025, showing substantial improvement in the trade position. This data point suggests strengthening external demand for Brazilian goods and potential support for the Brazilian real.
Global Markets
Equities finished last week on a strong note, with all large Asia Pacific markets rallying on Friday. South Korea’s Kospi led with a remarkable 5.75% gain, while Japan, Hong Kong, and Australia’s main indices each advanced more than 1%. Europe’s Stoxx 600 edged up approximately 0.65%, bringing the fourth consecutive weekly rise to about 2.65%. US S&P and Nasdaq futures traded higher before the weekend, suggesting broad-based risk appetite. However, today tells a different story, with most large regional bourses failing to maintain Friday’s momentum. Japan, Hong Kong, and Indian stocks advanced, but South Korea’s Kospi could not hold its early gains. The Stoxx 600 is nursing a small loss, while US index futures are trading firmly, suggesting some divergence in market sentiment across regions.
Benchmark 10-year yields rose on Friday and extended last week’s gains. The 10-year JGB rose 14 basis points to 2.77%, while most European yields increased by 7-12 basis points, with Italian rates rising the most at the upper end of this range. The 10-year US Treasury yield rose 11 basis points to 4.48%. Outside of the dramatic move in JGB yields, benchmark rates are mostly softer today. The US 10-year yield is off slightly more than two basis points to almost 4.45%, suggesting some consolidation after Friday’s move. China’s two-year yield slipped a couple of basis points to 1.22%, the lowest level since February 2025, indicating potential easing expectations in the near term.
Gold demonstrated resilience, settling above its 20-day moving average near $4156 for the first time since mid-May before the weekend. The yellow metal reached a new two-week high today near $4203 before reversing lower and falling slightly through $4137. Nearby support is established around $4120. Silver has displayed stronger momentum with a four-day rally intact as it entered today’s activity, rising 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. Silver tested the 20-day moving average today around $63.25 but was turned back, and notably, silver has not settled above the 20-day moving average since May 25. Support may now be established around $60.60.
August WTI crude oil was little changed before the weekend after falling to almost $67 on July 2. The contract settled on its highs, and follow-through buying on July 3 lifted it to approximately $69.25, the five-day moving average. The 200-day moving average resides near $70.35, and since breaking below this level last Tuesday, August WTI has not settled above it. The contract is currently trading between approximately $67.80 and $69.25 today. OPEC+ agreed to boost output before the weekend, which has provided some weight to oil prices, though the market remains relatively well-supported on a technical basis.
The New Zealand dollar is off almost as much as the yen despite the Reserve Bank of New Zealand meeting scheduled for Wednesday, with the swaps market favoring a rate hike with approximately three-quarters of the probability discounted. Notably, the Norwegian krone is the only G10 currency that is not falling against the US dollar today, suggesting that relative monetary policy divergence and commodity price dynamics continue to drive currency valuations.
