Key Takeaways
- The ADP report came in lower than expected, with 44,000 jobs added in the private sector in July, versus 65,000 expected.
- The S&P 500 has reached record highs due to strong earnings growth, particularly in semiconductors and tech sectors. The US dollar staying in the sidelines has helped the earnings story.
- Canada’s trade surplus increased in June, driven by higher exports, which supports Q2 growth.
- The euro remains supported by economic divergence between the EU and US, although the recovery appears temporary and not fundamentally strong.
- Overall, the dollar faces pressure due to mixed economic indicators and geopolitical factors influencing oil prices.
US: Soft ADP and lower oil limit Dollar recovery
The ADP report showed private employers added 44,000 jobs in July, below the 65,000 expected and down from June’s revised 95,000 gain. Hiring was uneven across sectors, with education and health services leading the increase. Small firms added the most jobs, which helped offset softer hiring among larger and mid-sized employers.
The headline was soft, but the wage details were less dovish. Pay growth for job-changers accelerated to the fastest pace in nearly a year. That suggests pockets of labour supply remain tight, even as overall hiring cools. For the Fed, this keeps the inflation side of the labour market story relevant.
Oil adds another layer to the dollar story. Headlines around a possible 60-day Hormuz deal have pushed Brent lower and helped lift risk sentiment. Still, markets are pricing a meaningful improvement before shipping risks have been fully resolved. As equities edge higher and oil stays under pressure, the US dollar should remain soft and vulnerable to further downside. The next test is today’s ISM services print, followed by Friday’s NFP report, which will carry more weight for Fed pricing and the dollar.
USD: Dollar remains soft as earnings surge
The S&P 500 has pushed to another record high, its 35th of 2026, helped by an earnings season that keeps clearing already high expectations. Q2 S&P 500 EPS growth is tracking near 33% y/y, roughly triple the historical ex-recession median of 11%. That is already an unusually strong profit backdrop, especially after six prior quarters of double-digit earnings growth. The index has also broken out of its two-month range, though technicals now warn that the rally is getting more stretched.
The revision story is just as important as the headline growth number. Consensus earnings expectations have moved sharply higher through reporting season, rather than fading after companies cleared the initial hurdle. Some broader earnings-season estimates look even stronger once large one-off mega-cap effects are included, but the cleaner takeaway is the same: profits are running well above normal. In plain terms, investors are rewarding beats and being forced to mark up the profit base.
The strength is still concentrated. Semiconductors, mega-cap tech and energy are carrying a large share of overall earnings growth, while defensive sectors are contributing far less. That keeps the rally tied to AI capex, cloud demand, margins and energy profits. It does not weaken the bull case, but it makes guidance more important as the earnings season moves past the heaviest reporting window.
The dollar’s role has been quiet, which is exactly what equities needed. A stable or softer USD at least, helps global earnings translation and keeps financial conditions from tightening too quickly. That backdrop has allowed earnings to dominate, especially while AI spending and consumer demand remain solid. If the dollar strengthens again alongside front-end higher real rates, earnings will need to carry more of the load to keep the S&P 500 breakout intact.
CAD: Canada trade strength supports Q2 growth
Canada’s trade surplus widened to $3.9bn in June, up from a revised $3.7bn in May. Higher export values led the gain, helped by gold exports and a softer Canadian dollar. In volume terms, exports rose 1.1%, while imports fell 1.5%. That mix points to solid support from net exports in Q2 GDP.
The quarterly picture was stronger. Export volumes rose 5.4% q/q, while import volumes increased only 1.4%. As a result, net exports likely made a large contribution to growth. Based on last week’s monthly GDP data, Q2 growth is tracking slightly above 3% annualized.
The improvement is no longer confined to gold and oil. Those categories still explain much of the rebound over the past year, but broader export categories have also improved. Most major groups are now higher than a year ago. That points to a healthier trade backdrop, even after adjusting for price effects.
The July manufacturing PMI added to the positive domestic story, rising to 53.5 from 53.0. Output, new orders, and hiring all improved, although export orders fell again due to tariffs and geopolitical disruption. For USD/CAD, the picture remains mixed: better Canadian data helps, but lower oil prices and wider US-Canada two-year spreads near 138bp limit CAD upside. New US tariff risks in August could also weigh on Q3 trade momentum.
EUR: Cyclical convergence lends euro lifeline, for now
The sharp rebound in the EZ-US economic surprise differential is providing a modest tailwind for the euro, particularly as it coincides with a partial recovery in Eurozone-US rate differentials. However, the rates move has been driven in part by a more hawkish ECB response to higher oil prices following Middle East tensions, rather than a decisive improvement in Eurozone growth fundamentals. As such, the latest moves reflect a cyclical correction in relative expectations rather than the emergence of a structurally bullish euro regime.
EUR/USD has been as high as 1.2080 in early 2026, and as low as 1.1325 in late June. After breaking above former resistance near 1.1450, EUR/USD ran into a key technical barrier comprising both the downtrend line in place since January and the 100‑day moving average near 1.1570. The broader message remains consistent with the narrative that has developed over recent weeks: the recovery looks tactical rather than structural in our view.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: August 03 – 07
All times are in EST
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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.
