Sintra and NFPs in focus this week

USD

The dollar slipped for a second session on Friday, the DXY ending the week around 101.2, though the index still held a roughly 0.3% weekly gain. The centrepiece this week is Thursday's June payrolls report, pulled forward ahead of Friday's July 4th closure. We look for a headline print broadly in line with consensus, which projects 115k jobs added in June and unemployment steady at 4.3%. That is an outcome we think favours no change rather than further hikes, though two successive payroll beats temper that conviction. ISM manufacturing and JOLTS feature midweek, and Warsh speaks at Sintra on Wednesday. We still believe the dollar is topping out, but a fragile Middle East ceasefire, strained anew over the weekend after four days of tit-for-tat strikes near the Strait of Hormuz, keeps a safe-haven bid in play near-term.

EUR

EURUSD firmed on Friday to close out last week's trading just shy of 1.14, albeit with those gains owing more to dollar softness than euro strength, given the light data calendar. The start of this week, however, is dominated by Sintra, which opens today. Lagarde's remarks and Wednesday's policy panel are the key tests of whether the ECB is one and done, or if further policy tightening should be the base case. We favour the first of these two scenarios, given the recent evolution of data, with immediate EURUSD risks skewed downward accordingly, if Lagarde echoes a similar sentiment.

GBP

Sterling held around 1.32 against a softer dollar on Friday, having rebounded from a multi-month low earlier in the week. The major driver for the pound remains political rather than monetary, however, with Keir Starmer’s imminent replacement a key source of uncertainty. Granted, Andy Burnham is the clear frontrunner in any contest. But a leadership vacuum and unresolved fiscal questions remain, keeping us biased towards GBP downside. Politics aside, a string of BoE speakers, including Governor Bailey on Wednesday and Friday, forms the other focus domestically this week; any drift towards fiscal or political territory will be parsed hard. Cable also stays sensitive to energy through the UK's terms of trade, unhelpful given the weekend flare-up in the Middle East, and to Thursday's US payrolls.

CAD

After briefly breaking above 1.42 midweek, USDCAD eventually stabilised in the high-1.141s as last week drew to a close. In keeping with our longstanding view, we think a credible Hormuz reopening eases the dollar's haven bid but caps loonie upside via softer oil. The weekend has muddied the picture: renewed US–Iran hostilities near Hormuz have nudged WTI back towards $70 this morning, lending marginal support without dispelling the risk-off bias that favours the dollar, albeit USDCAD has dipped fractionally lower through early trading. As the week progresses, attention turns to April GDP, published Tuesday, where consensus predicts a 0.4% bounce, before Wednesday's Canada Day holiday, with remarks from Governor Macklem also due. With the BoC on hold at 2.25% and seen as more patient than a hawkish Fed, the loonie is likely to remain hostage to oil and risk sentiment.

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