USD higher ahead of June jobs report
The US dollar was stronger overnight as markets looked ahead to tonight’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 last night’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%.
Aussie at three-month lows despite manufacturing recovery
Australia’s S&P Global manufacturing PMI rose to 51.5 in June from 50.7, marking its highest reading since January and a third consecutive month above the 50 threshold. Stronger hiring activity and higher input inventories supported the improvement.
However, factory output contracted for a fifth straight month, while new orders declined again as economic uncertainty and higher prices continued to weigh on demand.
Although price and supply pressures remained elevated, inflation eased from May levels. Overall, the data points to a gradual improvement in manufacturing conditions, but weak production and ongoing supply challenges continue to temper the outlook.
The Aussie weakened in line with a stronger US dollar with AUD/USD back near three-month lows.
Euro weakens as inflation slows
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 fell below 1.1400, while GBP/EUR extended its move convincingly above 1.1600.
In Asia, AUD/EUR and NZD/USD rebounded from three-month lows, while EUR/SGD fell back to three-month lows.
The softer inflation backdrop reduces the risk of rate hikes, given the sharp decline in oil prices since the US and Iran agreed to an interim peace deal.
European Central Bank President Christine Lagarde confirmed this view, highlighting a more balanced risk outlook than just a few weeks ago, saying downside risks to growth and upside risks to inflation are now less pronounced.
A similar acknowledgment of easing inflation risks from the Fed’s Warsh weighed on the dollar, causing earlier gains to ease, although the USD was still higher on the day. 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.
USD stronger ahead of US jobs report
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Key global risk events
Calendar: 29 June – 3 July
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