Warsh and soft NFPs weigh on the dollar to begin July

The dollar ends the week softer than it started, with the DXY back below 101 as of writing late on Friday. A seemingly dovish Fed Chair Warsh and some unambiguously soft labour market prints were largely responsible for the damage. Still, the move aligns with our thesis that the buck likely topped out in late June, with a series of headwinds now arrayed against the greenback as H2 gets underway. Elsewhere, dovishness from President Lagarde helped to contain EURUSD gains. But markets continue to overlook similar pushback from the BoE, which, alongside underpricing political risks, helped the pound to end last week in positive territory.

The week ahead plays host to a somewhat lighter docket, headlined by an RBNZ rate decision. June CPI releases in Norway and Sweden, plus a Canadian jobs report, round out the top of the data calendar. With that in mind, a period of consolidation looks likely, with as much focus on fallout from events in the week just gone as the immediate data catalysts ahead. Bigger tests are likely to come later in the month, when the pace of central bank meetings ramps up again.

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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