The dollar shows signs of topping out

We see growing evidence that the dollar may have peaked as June draws to a close. The DXY index has risen from around 99 at the start of the month, topping out just shy of 102 last Wednesday before slipping back over recent sessions. But growing confidence that a peace deal between the US and Iran will hold, and our skepticism over the prospect of Fed rate hikes, now leaves us looking for the buck to give back some of those gains as the second half of 2026 gets underway.

The next immediate test of our thesis comes on Thursday, when the US jobs report for June is published. Markets expect to see 115k payroll gains, with the unemployment rate stable at 4.3%. If realized, we think that supports no change in rates, rather than favoring further tightening, though after two large successive payrolls beats, our confidence is somewhat reduced relative to normal levels. That aside, the other focus for the week ahead will be Sintra, where ECB rate-setters are gathering. We look for President Lagarde to steer markets on whether the Bank is one and done with rate increases, or if a follow-up move is needed. Together, this should help keep EURUSD at the centre of attention, with immediate risks skewed to the downside, even as we see a growing case for a rebound later in July.

You can read the Week Ahead in full here:

Authors:

Nick Rees, Head of Macro Research

Barry van der Laan, Senior FX Market Strategist

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