July 02, 2025

“The data was on the dollar’s side yesterday, but the critical event this week will be tomorrow’s non-farm payrolls report. At the same time, we are watching Trump’s huge bill make its way through Congress and for any news on the trade front.”

Tim Hallinan – Trading Director

USD

The dollar found some modest support yesterday afternoon, but not before it once again hit lows not seen since early 2022. While Fed Chair Powell left the door open for a July rate cut whilst speaking on a panel at the ECB forum in Sintra, some upside surprises in the JOLTS and ISM manufacturing data then shaved off some expectations for Fed easing. Job openings surprisingly bounced back from 7.4M to 7.8M, defying the consensus estimate for a drop to 7.3M. The ISM index also rose a touch more than expected, from 48.5 to 49.0, with the prices subindex picking up from May. In other news, the One Big Beautiful Bill Act narrowly made it through the Senate and is heading back to the House today, where it might encounter some more opposition and adjustments – the focus will be on how much deficits are likely to rise under the bill, though most of its contents have already been absorbed by markets. Today, ADP payrolls is the main piece of data, and investors will still be looking out on trade after Trump ramped up the pressure on Japan again yesterday, saying that ‘I’m not sure we’re going to make a deal – I doubt it’ in an interview. Tomorrow’s non-farm payrolls will be in the backs of minds, too.

GBP

Sterling touched another three-year high yesterday but has fallen more than 0.5% since as the dollar has recovered. Gov Bailey had little new rhetoric to give to markets at the ECB forum yesterday, though it was notable that he drew more attention to the weakening labour market rather than the upside risks to inflation. The market is nearly 90% certain that another rate cut will come at the August decision. The BoE’s Taylor speaks in Sintra today. In politics, some heavily watered-down welfare reforms were voted through, but now Reeves has a multi-billion hole to fill, increasing the risks that we get further tax hikes at the next budget. That may help to explain why sterling has underperformed the euro over the last week.

EUR

The euro continued to garner a lot of attention throughout the second day of the forum in Sintra, and it briefly rose to a fresh multi-year peak. President Lagarde did her best to avoid the subject, but the likes of Guindos, Simkus, and Kazaks expressed concern about what might happen if EURUSD pushes above 1.20 and starts to depress inflation. The forum closes with a speech from Lagarde today, and we get an unemployment rate print for June this morning.

Markets

Stocks broadly closed lower yesterday, with US indexes in particular affected by a 4% drop in Tesla after Trump threatened to withdraw subsidies for Musk’s companies. The mood is improved this morning, however, and Europe is set for a jump at the open.

Main Economic Events (All Times CET)

11:00am: Eurozone Unemployment Rate
2:15pm: ADP Employment Change

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