Greenback approaches May 2025 highs ahead of US jobs report
The US dollar was stronger on Wednesday as markets looked ahead to today’s all-important US jobs report.
The June non-farm payrolls report is earlier than usual due to the US’s Independence Day long weekend. Markets are looking for 113k new jobs versus last month’s 175k result, with the unemployment rate forecast to stay steady at 4.3% (source: Bloomberg).
Market expectations remain positive for the jobs report after yesterday’s private-sector ADP employment report came in at 98k, below expectations, but with the three-month average at the highest level since January 2025.
The USD index, a measure of greenback strength, neared the highest level since May 2025.
Across major markets, the euro was the hardest hit after a drop in June inflation, with EUR/USD down 0.4% and nearing one-year lows.
The Aussie was also weaker, down 0.3%, while the British pound bucked the trend with GBP/USD up 0.1%.
Yen holds near 40-year low
USD/JPY has climbed to levels not seen since the post-Plaza Accord period, putting the spotlight on the 163–165 zone. We believe this area could increase the likelihood of official intervention.
That said, the pace of the yen’s decline may matter more than any specific exchange rate level. Japanese authorities may be less inclined to step in unless moves become unusually rapid or disorderly. Questions also remain about the effectiveness of intervention, given that Japan’s previous JPY11.7 trillion intervention effort delivered only short-lived support for the yen. Even so, intervention could have a greater impact if accompanied by coordination or clear backing from the US Treasury.
USD/JPY remains near its multi-decade peak, trading just below the 40-year high above the 162.00 level. The pair is around 0.3% below its recent high of 162.84, reached on 1 July. Initial support is seen at the 21-day EMA at 161.23, followed by the 50-day EMA at 160.15 and the 100-day EMA at 158.90.
EUR/JPY is trading around 1.7% below its recent high of 187.95, reached on 17 April. The next key support level is the 100-day EMA at 184.34.
A higher bar for the hawks
The euro came under pressure yesterday after June inflation printed below expectations. Headline CPI slowed to 2.8% y/y (vs. 3.0% expected), while core inflation eased to 2.4% (vs. 2.5%). EUR/USD remained pinned near 1.14, while GBP/EUR extended its move convincingly above 1.16.
The softer inflation backdrop reinforced a growing market narrative that central banks may be able to dial back their hawkish bias, given the sharp decline in oil prices since the US and Iran agreed to an interim peace deal.
Speaking at the ECB Forum in Sintra, President Lagarde added to that view, highlighting a more balanced risk outlook than just a few weeks ago, with downside risks to growth and upside risks to inflation appearing less pronounced. A similar acknowledgment of easing inflation risks from Fed’s Warsh weighed on the dollar, reversing earlier gains. US Treasury yields also moved lower. Options markets continue to show an aggressive build-up in positions that would benefit from a more hawkish Fed path, leaving the US dollar and rates increasingly vulnerable to even modest dovish signals.
With little in the way of fresh forward guidance emerging from Sintra, incoming data is taking centre stage as markets recalibrate their hawkish bias to a more moderate outlook. Today’s US labour market report and next week’s inflation release will therefore be closely watched.
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
