Central bank speak key ahead of NFPs

USD

The dollar closed the first half on a firm footing, holding just below its 24 June peak, despite month and quarter-end flows weighing on the buck through the back end of yesterday’s trading. Today brings Chair Warsh's first public remarks since the June FOMC, alongside ISM manufacturing and JOLTS, before Thursday's June payrolls, pulled forward ahead of Friday's July 4th closure. Consensus looks for 115k jobs and unemployment steady at 4.3%, which should do little to move the needle at the Fed. As such, we still believe the dollar is topping out, but lingering haven flows and a hawkish, Warsh-led Fed could keep the dollar supported near term.

EUR

EURUSD spent Tuesday trading around the 1.14 mark, surprisingly failing to give up much ground, despite softer-than-expected June inflation prints from Germany, France, and Italy. That sets the scene for today’s euro-area flash HICP, which consensus sees easing to around 3.0%, down from 3.2% in May. A miss looks likely, however, given national prints, reinforcing a case that the ECB is one-and-done after last month's rate increase. Inflation data aside, President Lagarde is speaking in Sintra, forming the other major euro test for today. Any dovish validation would leave immediate EURUSD risks skewed lower, even as we continue to see a growing case for a rebound later in July.

GBP

Sterling was little changed on Tuesday, belying political headwinds. Of note, the government’s long-delayed Defence Investment Plan offered little indication of how the government will pay for increased spending, despite the promised sums underwhelming already low expectations. Looking ahead, Governor Bailey appears on today's Sintra panel, ahead of Thursday's US payrolls. Cable stays sensitive to energy through the UK's terms of trade, unhelpful given the renewed Middle East flare-up. Most importantly, however, with a vacuum of political leadership still unresolved, we remain biased towards GBP downside.

CAD

USDCAD ultimately finished yesterday broadly flat, with markets broadly discounting April’s GDP rebound. The data indicated 0.5% MoM growth, albeit, given more recent events, that may as well be ancient history for loonie traders. Two events frame today. It is Canada Day, so domestic markets are shut, and CAD liquidity will be thin, while the US, Canada, and Mexico also hold their first CUSMA review meeting. We do not expect a clean extension, at least not yet, so trade uncertainty is likely to linger even though the pact remains in force regardless. Governor Macklem also features at Sintra. With the BoC patient against a hawkish Fed, we think the loonie stays hostage to oil, risk sentiment, and trade risks, its upside capped for the time being.

Disclaimer

This information has been prepared by Monex International Markets plc, part of Monex S.A.P.I. de C.V. (“Monex”). The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. All entities in the “Monex” group of companies are regulated for different products and services within the jurisdictions in which they operate. Details of the different entities can be found here. Details of the respective entities’ regulated status and available products and services can then be found on the relevant links to the individual jurisdictions’ website.