Forex News

ING’s Francesco Pesole notes that softer US jobs data has weakened the Dollar but does not expect this alone to extend USD losses. He argues the report curbs hopes for two Federal Reserve hikes but is not weak enough for a major dovish repricing. ING expects DXY to stabilise in a 100.0-101.5 range in coming weeks, with thin US holiday liquidity raising intervention risks.

ING sees DXY stabilising near term

"Softer US jobs data has weakened the dollar, but we do not see this as sufficient to extend USD losses on its own. We look for near-term stabilisation in DXY. Thin liquidity around the US holiday today and Monday increases the risk of JPY intervention, with an initial round that may already have occurred yesterday morning."

"Overall, the report makes it harder for markets to rebuild expectations of two Federal Reserve rate hikes. At the same time, it is not weak enough on its own to trigger significant dovish repricing."

"Despite yesterday’s front-end correction, more than 25bp remains priced into the December contract, and markets can still hold on to expectations of at least one hike into the 14 July CPI release."

"While the data supports our bearish USD view for the second half of the year, we do not see the greenback entering a sustained downtrend yet. Instead, DXY may stabilise in the 100.0-101.5 range over the coming weeks."

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

• GBP/USD trades near two-week highs at 1.3385, on track for a 1.3% weekly gain.
• Soft US employment data has cooled hopes of Fed tightening undermining demand for the USD.
• In the UK, confidence in the new cabinet's fiscal responsibility has kept the pound bid this week.

The British Pound (GBP) appreciates against the US Dollar (USD) on Friday, on track for a 1.3% appreciation this week, its strongest weekly performance in three months. The GBP/USD pair is trading at 1.3370 with downside attempts limited, as the US Nonfarm payrolls disappointment has undermined speculative demand for the US Dollar.

Data released by the US Bureau of Labour Statistics on Thursday revealed that US payrolls grew by 57K in June, just above half of the 110K increase forecasted by the market. Beyond that, May’s data was revised down to a 129K increase from the previous 172K, and the Labour Force Participation Rate fell to 621.5%, its lowest level in the last five years.

Traders scale back Fed hiking bets

These figures cooled market expectations of immediate Federal Reserve (Fed) rate hikes, pushing US Treasury yields down and dragging the US dollar with them. Futures markets are now pricing a 17% chance of a quarter-point rate hike in July and a 53% chance of a tightening move in September, down from 28% and 65%, respectively, ahead of the payrolls data release.

In the UK, the uncertain political scenario might be weighing on Sterling’s recovery, although Andrew Burnham, the best-positioned candidate to replace Keir Starmer as prime minister, has reiterated that he will play by Chancellor Reeves’ fiscal rulebook, which has soothed investors.

Beyond that, the UK calendar shows the final reading of June’s S&P Global Services Purchasing Managers’ Index as the main attraction on Friday. Preliminary data showed that business activity in the sector eased to 48.7 points from 49.3 in May.

• The Euro gains to near 1.1455 against the US Dollar as the latter underperforms due to weak US NFP data.
• Investors shift focus to the US ISM Services PMI data for June.
• ECB officials confirm that second-round effects of inflation have not materialized yet.

The Euro (EUR) is up 0.16% to near 1.1455 against the US Dollar (USD) during the European trading session on Friday. The EUR/USD pair gains as the US Dollar underperforms its peers due to a slight ease in hawkish Federal Reserve (Fed) interest rate expectations.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.15% lower to near 100.70.

The odds of the Fed delivering at least one interest rate hike in the September policy meeting have diminished to 53.2% from almost 64% seen on Wednesday, according to the CME FedWatch tool.

The reason behind traders trimming hawkish Fed bets is weak United States (US) Nonfarm Payrolls (NFP) data for June, which showed that the economy created 57K fresh jobs in June, significantly lower than estimates of 110K. Also, the May data was revised lower to 129K from 172K.

Meanwhile, investors shift their focus to the US ISM Services Purchasing Managers’ Index (PMI) data for June, which will be released on Monday.

On the Eurozone front, traders will likely reconsider European Central Bank (ECB) interest rate expectations as officials confirm that second-round effects of inflation have not emerged yet.

On Wednesday, ECB President Christine Lagarde said at the ECB Forum on Central Banking 2026 that second-round inflationary effects have yet to materialize, but we are keeping a close eye on it. Lagarde added, "Risks are more broadly balanced than a few weeks ago."

Also, remarks from ECB policymaker and the head of Belgium's central bank, Pierre Wunsch, released by Econostream on Wednesday, have signaled that he is not in favor of further monetary policy tightening unless second-round effects of inflation start emerging.

Lagarde hints at regret over past guidance as risks rebalance for the Euro

The FXS Speechtracker score of 6.2, above Lagarde’s historic 5.6 average, signals a slightly more impactful and marginally more hawkish tone than usual, driven by the admission of regret about being bound by past forward guidance and the pledge to take necessary steps to contain inflation. The statement that risks are now more broadly balanced and that the Euro area is “not in stagflation” reduces immediate tail-risk fears, but keeps a tightening bias alive if price pressures re‑intensify.

For the Euro, the combination of balanced risk assessment and a clear anti‑inflation commitment supports a modestly constructive bias, especially versus lower‑yielding peers. However, the lack of fresh policy triggers and the emphasis on balance rather than clear upside risks to inflation suggest only limited upside, with markets likely to fade initial Euro strength unless incoming data re‑accelerate price or wage dynamics.