North American Summary and Highlights 1 Jul

North American session

The USD largely erased its European losses in North America. Most pairs returned to levels seen near the European open, though USD/CAD was stronger near 1.3650 from near 1.36, as AUD/CAD rose to .8975 from .8950. The USD was supported by a strong 375k increase in May job openings, and to a lesser extent a rise in June’s ISM manufacturing index to 49.0 from 48.5. Fed’s Powell stated that with inflation expected to rise it was prudent to wait on rates, but he did not rule out a move in July. 

The Senate passed a budget bill that adds more debt than the House version. Late in the day Trump said he did not expect a trade deal with Japan which could pay 30% or 35% tariffs and that he was not thinking about extending the tariff pause after July 9. The USD/JPY response was modest, remaining near 143.75, over a big figure above the low. EUR/USD ended near 1.1790, off the low but still below European highs.  

European morning session 

The USD weakened across the board through the European morning, with the JPY and CHF the best performers, both gaining around 0.5%, while riskier currencies were generally up around 0.3%, although the NOK matched CHF and JPY gains, and the SEK also slightly outperformed the EUR. The CAD lagged behind, gaining only around 0.1%.  

There was no particular trigger for USD losses in Europe, with worries about tariffs, the budget bill and more Fed easing all seen as underpinning the USD decline. The USD weakness/CHF strength prompted SNB governing board member to say that negative rates are an option, but there was no impact from his comments. The ECB’s De Guindos said that the ECB could ignore EUR strength this side of 1.20 which did nothing to halt the USD decline.  

Data was fairly uneventful. Eurozone June CPI was in line with consensus and unchanged from May at 2.3% y/y core. Eurozone manufacturing PMI was revised only marginally higher, while the UK PMI was unrevised. German unemployment rose slightly less than expected and the unemployment rate was unchanged at 6.3%.