North American Summary and Highlights 2 Jul
Overview - Fiscal worries saw the GBP particularly weak. Elsewhere the USD reversed European gains in North America.
North American session
The ADP employment report was weak with a decline of 33k, though the consequent dip in the USD was erased fairly quickly. GBP/USD, under pressure from rising gilt yields as Chancellor Reeves’ future was called into question, saw no bounce, and subsequently fell below 1.36.
Later in the day Trump announced a trade deal with Vietnam under which Vietnam would pay 20% tariffs with the US having tariff-free access to the Vietnamese market, but the USD was unimpressed, slipping into the afternoon. USD/JPY fell to 143.60, still above the post-ADP low, after having moved back above 144, while EUR/USD rose to 1.18 from 1.1750. GBP/USD recovered above 1.36 but remained down on the day with EUR/GBP up to .8650 from .8580. USD/CAD fell below 1.36 from 1.3650 while AUD/USD rose to .6585 from .6550.
European morning session
The USD was generally stronger through the European morning, with USD/JPY and GBP/USD leading the way. USD/JPY rose 45 pips to 144.20, GBP/USD fell 50 pips to 1.3690 while EUR/USD fell just 20 pips to 1.1770. GBP weakness came with some steepening of the UK yield curve which may reflect the failure of the government to pass spending cuts through parliament on Tuesday.
There wasn’t much data of note, but the Italian unemployment rate showed a surprise sharp rise to 6.5%. The ECB’s Wunsch, the Belgian central bank governor, made comments favouring a mildly supportive ECB stance due to weak growth and inflation, but this produced no real reaction with EUR yields slightly higher.