United States
Following recent US employment data and the anticipation of a robust Consumer Price Index (CPI) reading, US interest rates have shown a firm stance as the new week begins. This has contributed to a strengthening of the US dollar. Meanwhile, tariff notifications from the White House are expected to start being dispatched today. Some letters were anticipated before the weekend, but it appears July 9 has lost its initial urgency with reciprocal tariffs now set to begin on August 1. The US has reached agreements with the UK and Vietnam, and partly with China, while several Asian countries are believed to be close to deals. The dollar is gaining against most G10 and emerging market currencies, except for the Swedish krona, which has been supported by a stronger than expected preliminary June CPI. US stock markets are under pressure, with S&P futures declining by nearly 0.5% and Nasdaq futures down about 0.6%. Benchmark 10-year yields in Europe are mostly up by 1-2 basis points, while the UK 10-year Gilts are retracting more of last week’s rise with yields down by 1.5 basis points. The 10-year US Treasury is steady at around 4.35%. The US plans to auction $58 billion in three-year notes, $39 billion in 10-year notes, and $22 billion in 30-year bonds this week.
Eurozone
Following the release of US jobs data last week, the Euro is on a slight downward trajectory, falling just below $1.1720. The consolidation phase might turn into a correction if it breaks $1.1685, potentially driven by a broader US interest rate advantage. May’s retail sales in the eurozone declined by 0.7%, almost offsetting previous gains from the year’s initial months. A key report this week showed a rise in the June composite PMI to a three-month high, but consumption remains weak, a contributing factor to expectations of economic stagnation in the eurozone for Q2. This weakness is largely due to reduced government spending, even as German factory orders recently disappointed. However, a rise in May’s industrial output by 1.2% provided some optimism and reflects cumulative growth in Q1.
United Kingdom
The recent spike in sterling to $1.3790, its highest since October 2021, was curtailed by political events leading it to dip near $1.3565 the following day. The currency has shown two consecutive days of consolidation and is revisiting last week’s lows, with the next support level likely around $1.3530. The key economic report from the UK this week is the May GDP data, which is expected towards week’s end. Following April’s 0.3% contraction, economists anticipate confirmation that the UK economy has slowed from a 0.7% growth in the first quarter to around 0.2% growth in the second quarter.
China
Last week, the dollar held steady above CNH7.15, with a recovery bringing it to CNH7.1740. Currently, it stands near CNH7.1785, surpassing the 20-day moving average for the first time in two weeks. The target stands around CNH7.1925. China’s economic data this week, particularly price data due Wednesday, is in focus. It is anticipated that the CPI, declining 0.1% year-over-year from March through May, may stabilize in June. Disinflation in goods prices appears more linked to investment strategies and market competition than demand. Meanwhile, producer prices are still entrenched in a deflationary stage, with a minor forecast improvement suggesting moderate easing in declines.
Japan
The dollar strengthened against the yen after the US jobs report boosted US rates. Current gains are reaching nearly JPY145.50 as the next anticipated retracement at around JPY146 becomes likely if the JPY143.50 to JPY143.65 support range holds. Recently released data showed a surprising 4.7% year-over-year increase in Japanese household spending, significantly surpassing expectations. However, wage growth of 1% year-over-year in May fell short of expectations. When adjusted for inflation, real earnings were down 2.9% from the previous year. Upcoming data include May’s current account, likely showing a surplus although the trade balance may reflect a broader deficit consistent with historical May trends.
Canada
The US dollar is approaching this year’s lows against the Canadian dollar, nearing CAD1.3540. Although it recovered slightly before the weekend, the upward path resumed towards CAD1.3685. The Ivey PMI scheduled for release is unlikely to generate significant market movement, and the spotlight will be on the June jobs report at the week’s end. Canada’s job market is showing signs of a slowdown compared with last year, with both employment figures and unemployment rates indicating weaker labor market conditions.
Australia
The Australian dollar experienced pressure as it neared the $0.6600 mark last week, falling today to around $0.6535. Attention turns to the central bank’s upcoming decision, as futures markets adjust expectations and anticipate a potential rate cut. A quarter-point reduction would bring the cash rate target to 3.60%. New Zealand is also in focus, with its central bank meeting expected on July 9. Market speculation is concentrated on a possible cut in the current rate, with significant downward pricing for the year-end rate at 3.05%.
Mexico
Despite a robust US employment report, the US dollar experienced selling pressure against the Mexican peso, drawing closer to the MXN18.60 target. As markets open this week, the dollar is trading near MXN18.73, anticipating resistance around MXN18.80-83. Key data releases from Mexico include June’s automotive production and export figures, with vehicle output and exports reflecting notable year-over-year trends. However, the primary focus will be on the Consumer Price Index (CPI). If inflation appears to be accelerating, it could impact central bank decisions, particularly given the recent series of rate adjustments.
