Forex News

• Weak NFP revisions shift Fed hike expectations toward October.
• UK Services PMI contraction keeps Sterling’s recovery technically fragile.
• BoE speeches and Fed minutes guide next policy repricing.

The British Pound steadied against the US Dollar on Friday, but it is poised to end the week with gains of over 1% as investors turn skeptical that the Federal Reserve will raise interest rates at the September meeting. The GBP/USD consolidates at around 1.3350, unchanged.

GBP/USD steadies as traders push Fed hike bets beyond September

The US labour market remains solid despite June’s print, which missed estimates and was downwardly revised for April and May, indicating that -74K jobs were created in those two months. Traders reacted to the headline and now see a rate hike in October rather than September.

The new Fed Chair, Kevin Warsh, although he failed to provide forward guidance, reiterated the Fed’s commitment to tackle inflation. Next week, the FOMC’s minutes release will be keenly scrutinized by traders, who are looking for the next US inflation report, expected on July 14.

Besides the minutes, the ISM Services PMI will provide some clues about the status of inflation and employment. Initial Jobless Claims for the week ending July 4 are expected to rise from 215K to 219K.

In the UK, uncertainty about politics has failed to underpin Sterling, which is so far near levels last seen in mid-June, below the crucial 200-day Simple Moving Average (SMA) at 1.3399.

Even though Andy Burnham reaffirmed his commitment to the current fiscal rules, investors seem cautious. Meanwhile, The Independent revealed that he is considering an income tax break to help young people onto the property ladder.

Data-wise, the UK S&P Global Services PMI in June deteriorated further, from 49.3 to 48.8, due to a decline in New Orders, which fell for the fourth consecutive month. The report showed that companies cited persistent cost pressures and consumer constraints.

Next week, the UK docket will feature speeches by Bank of England officials, and the release of the Financial Stability Report.

Fed and BoE interest rate expectations

Money markets show that the Federal Reserve is not expected to raise rates in 2026, with odds standing at 46%, according to Prime Terminal data.

Meanwhile, futures imply a 70% chance of a rate hike by the end of 2026.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3354, holding below a key simple moving average (SMA) cluster now converging near 1.3409, which keeps the pair capped in the near term. Price sits under this overhead SMA resistance and the broader downward resistance trend line projected from around 1.3520, leaving the recent rebound looking more like a corrective bounce within a still constrained structure. The Relative Strength Index (14) at about 53 suggests mildly improving momentum, but not enough to offset the weight of these overhead levels.

On the topside, immediate resistance is seen at the SMA zone around 1.3409, with a subsequent barrier at the descending resistance trend line near 1.3520, where prior rallies have repeatedly stalled. On the downside, structural support is aligned with the longer-term upward support trend line originating near 1.3159, and a sustained break below that region would open the door to a deeper pullback despite the currently modestly positive momentum backdrop.

(The technical analysis of this story was written with the help of an AI tool.)

• AUD/USD climbs after softer US labor data, reinforcing expectations that the Fed may have less room to maintain restrictive policy.
• Australian activity improved, with the S&P Global Composite PMI rising to 50.4 and the Services PMI increasing to 50.5, both moving back into expansion territory.
• China’s RatingDog Services PMI held firm at 54.1, slightly below the previous 54.4 but still supportive for AUD sentiment due to Australia’s strong trade links with China.

The AUD/USD pair climbs near the 0.6940 level on Friday as the US Dollar (USD) remains under pressure following softer-than-expected United States (US) labor market data released on Thursday. The Australian Dollar (AUD) found additional support from stronger Australian Purchasing Managers Index (PMI) figures, which pointed to a mild improvement in domestic business activity.

The US Dollar extended its decline after the latest US employment figures signaled cooling in the labor market. Softer job creation reinforced expectations that the Federal Reserve (Fed) may have less room to keep policy restrictive for longer, weighing on Treasury yields and reducing demand for the Greenback.

In Australia, the S&P Global Composite PMI rose to 50.4 in June, up from 49.8, moving back above the 50 expansion threshold. The Services PMI also improved to 50.5, compared with 49.9 previously, suggesting that service-sector activity returned to modest growth.

The China RatingDog Services PMI came in at 54.1 in June, slightly below the previous 54.4 reading but still firmly in expansion territory. Since Australia’s export outlook is closely tied to Chinese demand, resilient Chinese services activity may help support sentiment around the Aussie.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6938. The pair is attempting to stabilize after a modest rebound but remains capped beneath the 100-period Simple Moving Average (SMA) near 0.6967, keeping the broader tone mildly negative despite improving momentum. The 20-period SMA around 0.6910 now runs below price, suggesting nearby dynamic support, while the Relative Strength Index (RSI) at about 60 hints at a recovery in buying pressure that has yet to decisively overcome the overhead supply.

On the topside, initial resistance is aligned with the recent horizontal cap at 0.6945, ahead of the 100-period SMA at 0.6967, which forms a more substantial barrier and would need to be reclaimed to ease the current cap. On the downside, immediate support is seen at 0.6931, with further cushions clustered at 0.6922 and 0.6912 before the 20-period SMA at 0.6910, a break of which would expose a deeper pullback toward the recent range base.

(The technical analysis of this story was written with the help of an AI tool.)

Royal Bank of Canada (RBC) economists Claire Fan and Nathan Janzen assess the implications of the U.S. decision not to extend CUSMA (Canada-United States-Mexico Agreement) on July 1st. They stress that the agreement still runs to 2036 with scheduled negotiations, and see outright termination as unlikely if economic logic prevails. They note reduced tariff risks, highlight Rules of Origin as a likely focus, and flag ongoing trade uncertainty.

CUSMA longevity and trade risk outlook

"The U.S. decision on July 1st to not extend CUSMA doesn’t end the agreement."

"The deal still doesn’t expire until 2036 with pre-scheduled negotiations over the next decade designed to increase the likelihood that it lasts beyond that deadline."

"Near-term trade risks for Canada remain, but we continue to view outright termination of CUSMA as unlikely if economic reasoning holds."

"In the (unexpected) event that CUSMA were to falter, the tariff rate that would replace it and the share of exports impacted have declined."

"Trade uncertainty is likely to persist regardless of outcome."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• The New Zealand Dollar gains against the US Dollar and keeps NZD/USD above the 0.5700 mark.
• China's services sector remains resilient despite a slight slowdown in June, supporting China-linked currencies.
• Softer-than-expected US employment data reduces expectations of Federal Reserve tightening.

NZD/USD trades around 0.5710 at the time of writing on Friday, up 0.21% on the day, supported by improved risk sentiment and a weaker US Dollar (USD) following a softer-than-expected US employment report. US financial markets remain closed on Friday in observance of Independence Day, which could keep trading volumes subdued.

The New Zealand Dollar (NZD) also draws support from the latest economic data released in China. The RatingDog Services Purchasing Managers Index (PMI) eased slightly to 54.1 in June from 54.4 in May but continued to point to robust expansion in the services sector, providing additional support to the Kiwi given New Zealand's close trade ties with China.

On the monetary policy front, ASB Bank has dropped its call for a July interest rate hike by the Reserve Bank of New Zealand (RBNZ). The bank now expects the central bank to leave its Official Cash Rate unchanged this month before resuming a gradual tightening cycle from September, with 25-basis-point increases taking the policy rate to 3.25% by early 2027.

The main driver behind NZD/USD strength, however, remains the weakness of the US Dollar. Data released on Thursday showed that the United States (US) economy added just 57K Nonfarm Payrolls (NFP) in June, well below market expectations of 110K. The weaker labor market report prompted investors to scale back expectations for further interest rate hikes by the Federal Reserve (Fed).

According to the CME FedWatch tool, the chance of a September rate hike has fallen to around 53%, down from nearly 63% before the employment report. This reassessment of the monetary policy outlook continues to weigh on the Greenback while supporting risk-sensitive currencies, including the New Zealand Dollar.

Commerzbank’s Commodity Research team, led by Norman Liebke and colleagues, notes that Oil prices have fallen as optimism grows over US–Iran talks and a potential reopening of the Strait of Hormuz. The bank highlights upcoming EIA forecasts, possible OPEC+ quota adjustments, and argues that current price weakness reflects expectations of a supply glut rather than confirmed evidence of oversupply.

Prices fall on shifting expectations

"Given the ongoing uncertainty, the oil price is likely to continue reacting strongly to new developments regarding the situation in the region."

"Following the framework agreement, production is likely to have stabilized in June, so the EIA is expected to raise its forecasts for oil supply in the second half of the year slightly."

"Even if a significant quota increase remains unlikely, OPEC+ is likely to yield to the pressure, at least in part."

"The price trend and the available data therefore do not align."

"The fall in oil prices is likely due more to expectations than to an actual supply glut."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

ABN AMRO’s Georgette Boele warns that USD/JPY trading near multi-decade highs has heightened the risk of intervention in the Japanese Yen (JPY). She notes markets are long Dollars and extremely short Yen, leaving room for a sharp reversal if sentiment shifts. Boele argues that, after recent nervousness, USD/JPY may not revisit this week’s elevated levels for some time.

Yen positioning raises reversal risk

"USD/JPY was near multi-decade highs and this raises intervention risk."

"USD/JPY reached its highest level since 1986, suggesting that markets were testing the tolerance of the Japanese authorities, and possibly the US authorities as well."

"Since the beginning of July, markets have become increasingly nervous about the risk of yen intervention."

"Positioning remains stretched: the market is long US dollars and extremely short yen."

"If sentiment shifts in favour of the yen, whether because of intervention concerns or other factors, the recovery could be much sharper."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• USD/JPY edges higher on Friday as the US Dollar stabilizes, while intervention concerns linger.
• Japan's Finance Minister reiterates that authorities are ready to respond to excessive currency moves.
• The interest rate differential between Japan and the United States remains supportive of USD/JPY.

USD/JPY rebounds on Friday after falling nearly 0.90% the previous day, amid speculation that Japanese authorities may have intervened in the foreign exchange market after the Japanese Yen slid to a 40-year low earlier this week.

At the time of writing, the pair is trading around 161.25, rebounding from an intraday low of 160.49, its weakest level since June 18.

Traders remain alert to the possibility of intervention. On Friday, Japan's Finance Minister Katayama reiterated that authorities are "ready to act appropriately" in response to excessive currency fluctuations and are "coordinating closely with the US."

Meanwhile, the US Dollar (USD) is showing signs of stabilization after coming under heavy selling pressure following weaker-than-expected US Nonfarm Payrolls (NFP) data released on Thursday, which dampened expectations of an imminent Federal Reserve (Fed) interest rate hike.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 100.80 after falling to a two-week low of 100.56. The recovery in the Greenback is also limiting gains in the Japanese Yen.

The US Dollar's downside has remained limited as the weak NFP report only delayed expectations for a Fed interest rate hike. With inflation running well above the Fed's 2% target, the central bank is widely expected to maintain a restrictive monetary policy stance.

According to the CME FedWatch Tool, the probability of a September rate hike fell to 53% from 63% before the data release, shifting market expectations toward December, where the odds stand at 76.8%.

The Bank of Japan's (BoJ) tightening bias has done little to support the Japanese Yen, as traders continue to take advantage of Japan's relatively low interest rates through carry trades.

The wide interest rate differential between Japan and the United States keeps USD/JPY's broader bias tilted to the upside.

Wells Fargo Economics expects Japan’s May labor cash earnings to confirm a sustained wage-price cycle, supporting Bank of Japan (BoJ) policy normalization. The report highlights strong Shuntō wage settlements and resilient Gross Domestic Product (GDP), and projects that the BoJ will raise rates by 25 bps in Q3, likely September, taking the policy rate to 1.25% by year-end.

Wages support BoJ tightening outlook

"With Japan’s labor cash earnings for May due next week, the release will offer a fresh read on whether the wage-price cycle remains intact. The Bank of Japan (BoJ) continues to signal conviction in its path toward policy normalization, as April labor cash earnings and ordinary time earnings (the BoJ's preferred gauge of underlying wage momentum) rose 3.6% and 3.3% year over year, respectively."

"This year's Shuntō negotiations delivered another round of strong pay gains, with labor unions securing average wage increases of more than 5% for a third consecutive year, effective from April. Given the limited coverage of union workers and the lagged pass-through from negotiated settlements to realized earnings, wage growth should remain supported in the months ahead."

"While inflation has been soft, the fading of government subsidies and impact of a weaker yen on import prices should contribute to a gradual pickup in inflation. Combined with resilient GDP growth and a solid Q2 Tankan report, a strong wage print would support the case for further tightening. As such, we continue to expect the BoJ to deliver a 25 bps rate hike in Q3 (most likely September), bringing the policy rate to a terminal level of 1.25% by year-end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

TD Securities strategists highlight that the June United Kingdom (UK) Decision Maker Panel (DMP) survey shows one‑year inflation expectations easing while three‑year expectations stay near 3%. Despite lower near‑term inflation views, firms’ price‑setting intentions and expected wage growth have edged higher. They argue these shifts are too small to alter most Monetary Policy Committee (MPC) members’ preference to hold rates in July, suggesting a slower pass‑through from lower energy prices to corporate expectations.

DMP survey hints at sticky pricing

"The June DMP survey shows inflation expectations eased on a 1y basis to 3.3% (down from 3.7% in May), but the 3y measure remained steady at 2.9% (up from 2.7% pre-conflict)."

"And though businesses reported lower 1y inflation expectations, their own price setting intentions over the next year remained at 4.0% (and ticked up to 4.1% on a 3m smoothed basis)."

"Expected wage growth also moved up a touch from 3.4% in May to 3.5% in June."

"Ultimately, these moves are not large enough to shift the majority of the MPC members from a hold vote in July, but they could suggest that easing energy prices could take a bit longer to filter through to firms' expectations in the UK."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Societe Generale economists Sam Cartwright, Michel Martinez and Jorge Garayo note that Euro area inflation has not yet shown indirect effects from the energy shock in food or goods prices. They expect lower Brent to push headline inflation to 2.55% yoy in July and to trim around 0.5pp from 2026 inflation, but still see delayed pass-through lifting core and food inflation later in 2026.

Energy shock pass-through still delayed

"Euro area inflation has yet to show any signs of indirect inflationary effects from the energy shock. In the near term, euro area inflation is likely to benefit further from the fall in Brent, possibly pushing headline inflation to 2.55% yoy in July. However, the pass-through from higher upstream energy commodity prices to consumer prices takes time."

"Therefore, we still believe that indirect effects will push up core inflation and, alongside weather-related effects, food inflation later in the year, although these effects are likely to be weaker than previously estimated."

"So far, euro area inflation has yet to show any meaningful indirect inflationary effects from the energy shock in either food or goods inflation, the two sectors where these indirect effects are likely to be most prominent."

"However, given that food and core inflation tend to peak around 16 months after an energy shock, a large share of the inflationary effects from the shock and related supply disruptions have yet to pass through."

"More generally, the fall in energy prices has lowered our headline inflation forecast by around 0.5pp throughout 2026, with the peak in headline inflation now at 3% in late-2026, conditional on the MoU holding."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)