August 01, 2025

“The dollar is heading for its best week since 2022, but there is some calm this morning as markets prepare for a critical non-farm payrolls print this afternoon.”

Sam Cornford – Head of Trading

USD

Trump announced a new set of tariffs for those countries with which the US is yet to make a deal, with a base rate of at least 10% and rates of 35% and 39% for Canada and Switzerland respectively. But, with negotiations still in progress and markets anticipating more deals to be signed, traders have not been spooked and the dollar is consolidating this morning. The dollar index is up 2.4% in total since the Monday open, setting it up for its best weekly performance since late 2022 when EURUSD hit parity. The data yesterday printed broadly as expected, with core PCE inflation ticking up from 0.2% to 0.3% m/m and the employment cost index holding steady at 0.9% q/q.

It is all about non-farm payrolls today. June was 147K, the consensus for July is 104K, and the Bloomberg ‘whisper’ is 120K. A scary downside surprise would likely lead to ramped up bets for a September cut, while a strong showing could wipe out the possibility entirely – that might make this week the dollar’s best since 2020.

GBP

Sterling has dropped almost 3% against the dollar since last Thursday. It has steadied against most of its peers, however, thanks to a quiet UK calendar. There is a final revision to the July manufacturing PMI today and house price data has been fairly solid this morning, but the pound will be at the mercy of the US and eurozone data today.

EUR

After a 2.7% drop in the first half of the week, EURUSD appears to have found an anchor in the 1.14-1.15 region going into today’s CPI print. German CPI was a touch lower than expected yesterday at 1.8%, and the estimate for the eurozone-wide figure is 1.9%, down from 2.0% in June. Markets are unlikely to build up bets on a September ECB cut without a decent downside surprise here, though they will be keeping an eye on the deflationary risks that might prompt policymakers to move rates lower later in the year.

Markets

The global equity markets are struggling this morning as investors digest the latest tariff threats and Trump’s letters to major US pharmaceutical companies outlining how they should be cutting drug prices. S&P 500 futures are down 0.8% this morning.

Main Economic Events (All Times CET)

11:00am: Eurozone CPI
2:30pm: US Non-Farm Payrolls
4:00pm: US ISM Manufacturing

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