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Commerzbank’s Dr. Ralph Solveen reviews Germany’s new reform package agreed by CDU/CSU and SPD, focusing on bureaucracy reduction, labor market changes, and modest tax adjustments. He highlights that the largest potential benefit for the German economy lies in easing administrative burdens, while tax measures mainly offset inflation effects and some industrial policy steps risk intensifying subsidies rather than broadly strengthening Germany as a business location.

Reform mix of relief and new burdens

"The CDU/CSU and the SPD have agreed on a reform program aimed at preparing Germany for the future. The planned measures to reduce bureaucracy, in particular, show great promise because they could give German businesses more leeway. There will also be some relaxation of labor market regulations."

"Examining the individual areas, the planned measures to reduce bureaucracy have the greatest potential to ease the burden on businesses and improve Germany’s competitiveness as a business location."

"The decisions on taxes are disappointing. This is because the planned tax relief is likely to correspond largely to the measures that are necessary every year anyway to adjust the tax schedule for inflation in order to prevent bracket creep."

"However, many are likely to result in a further intensification of industrial policy rather than a general strengthening of Germany as a business location."

"The extent to which today's announced measures will help the German economy depends, of course, on their exact implementation. This is particularly true in the area of reducing bureaucracy. For instance, it remains to be seen how much the individual ministries will try to keep existing reporting requirements in their respective areas."

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

• AUD/JPY weakens after Australia reports an unexpected trade deficit.
• Australian exports fall sharply in May, pushing the trade balance into deficit.
• Intervention warnings from Japanese authorities continue to support the Japanese Yen.

AUD/JPY declines by 0.61% on Thursday, trading around 111.40 at the time of writing. The Australian Dollar (AUD) comes under pressure after trade data missed expectations by a wide margin, while the Japanese Yen (JPY) remains supported by speculation over a potential intervention from Japanese authorities.

According to the Australian Bureau of Statistics, Australia's Trade Balance shifted to a deficit of A$3.018B in May, following a revised surplus of A$1.383B in April. Markets had expected another surplus of A$2.2B. The deterioration was mainly driven by a 6.9% monthly decline in exports, while imports increased by 2.6%.

The weak trade figures add to concerns about Australia's economic outlook. Commerzbank also believes markets are overestimating the chances of another Reserve Bank of Australia (RBA) rate hike this year. The bank argues that falling Oil prices have reduced upside inflation risks, while the accelerating decline in housing prices could weigh on consumer spending. According to Commerzbank, inflation would need to rise significantly to justify further monetary tightening, a scenario it does not expect.

On the Japanese side, the Japanese Yen continues to draw support from expectations that the Bank of Japan (BoJ) will further normalize its monetary policy following its June rate hike. Toshihiro Nagahama, a member of Prime Minister Takaichi's Council on Economic and Fiscal Policy, said he expects another rate increase before the end of the year, although this outcome is already largely priced in by markets.

Traders also remain alert to the possibility of foreign exchange intervention. Japanese Finance Minister Satsuki Katayama recently reiterated that authorities stand ready to respond at any time to excessive currency moves, while the Ministry of Finance declined to comment on the recent sharp swings in the Japanese Yen. These intervention concerns continue to limit AUD/JPY's upside despite the interest rate differential that remains supportive of carry trades.

• Initial Jobless Claims decreased to 215K vs. the previous week.
• Continuing Jobless Claims went up to 1.814M.

According to a report from the US Department of Labour (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance shrank to 215K for the week ending June 27. The latest print came in below initial estimates (220K) and was slightly lower than the previous week’s 216K (revised from 215K).

Additionally, the 4-week moving average went down by 2.5K, bringing it to 222K from the revised average of the previous week (224.5K).

The report also indicated that Continuing Jobless Claims increased by 2K to 1.814M for the week ending June 20.

What do US Initial Jobless Claims figures mean for the US Dollar?

The Greenback reverses two daily advances in a row, breaking below the key 101.00 support to hit fresh multi-day lows when gauged by the US Dollar Index (DXY) on Thursday.

The move lower in the US Dollar (USD) comes as investors evaluate the latest US labour market report, while the sharp sell-off in USD/JPY also collaborates with the pullback.

Nonfarm Payrolls (NFP) in the United States (US) rose by 57K in June, the US Bureau of Labor Statistics (BLS) reported on Thursday. This print followed the 129K increase (revised from 172K) recorded in May and fell short of the market expectation of 110K by a wide margin.

Other details of the report showed that the Unemployment Rate edged lower to 4.2%, while the Labor Force Participation Rate declined to 61.5% from 61.8%. Finally, annual wage inflation, as measured by the change in Average Hourly Earnings, ticked up to 3.5% from 3.4% in May, as forecast.

"The change in total nonfarm payroll employment for April was revised down by 31,000, from +179,000 to +148,000, and the change for May was revised down by 43,000, from +172,000 to +129,000. With these revisions, employment in April and May combined is 74,000 lower than previously reported," the BLS noted in its press release.

Market reaction to US Nonfarm Payrolls data

The US Dollar (USD) came under selling pressure with the immediate reaction. At the time of press, the USD Index was down 0.55% on the day at 100.85.

This section below was published as a preview of the June Nonfarm Payrolls data at 05:00 GMT.

• Nonfarm Payrolls are expected to rise by 110K in June, slowing from the impressive 172K increase recorded in May.
• The Unemployment Rate is forecast to hold steady at 4.3%.
• US employment data could influence the Fed policy outlook and ramp up the US Dollar’s volatility.

The United States (US) Bureau of Labor Statistics (BLS) will release the Nonfarm Payrolls (NFP) data for June on Thursday at 12:30 GMT. 

With investors pricing in a hawkish Federal Reserve (Fed) policy outlook with the new Chairman Kevin Warsh at the helm, the underlying details of the employment report could influence the timing of a possible interest rate increase. 

Payroll data is among the indicators that generally trigger a significant market reaction. Still, this time, with all eyes on the inflation front, only a dismal print could hurt the US Dollar in a meaningful way.

What to expect from the Nonfarm Payrolls report?

Investors expect NFP to rise by 110K following three consecutive months of surprisingly strong increases. The Unemployment Rate is seen holding steady at 4.3%, while the annual wage inflation, as measured by the change in the Average Hourly Earnings (AHE), is projected to edge higher to 3.5% from 3.4% in May.

TD Securities analysts note that they expect NFP to rise at a softer pace than what markets expect.

“We expect June payrolls to moderate to 80k (55k private, 25k government) after strong early‑2026 gains. Job growth broadened beyond healthcare, led by trade/transport and leisure, but should cool this month. Local governments may stay firm on World Cup effects. We see the Unemployment Rate edging down to 4.2% as participation dips. AHE likely moderated to 0.2% m/m (3.5% y/y),” they add.

The Automatic Data Processing (ADP) reported on Wednesday that private sector employment in the US grew by 98K in June. This print followed the 122K increase recorded in May and came in below the market expectation of 113K.

Similarly, National Bank of Canada Senior Economist Jocelyn Paquet forecasts a 90K increase in NFP and explain:

“Based on the weekly data released by ADP and previously published “soft” employment indicators, such as S&P Global's flash composite PMI, job creation likely remained fairly robust during the month, although not as robust as what we had been accustomed to between February and May. Layoffs, for their part, may have increased slightly, judging by the rise in initial jobless claims recorded between the May and June survey periods. These two factors combined should, in our view, result in an increase of 90K in nonfarm payrolls.” 

How will the US June Nonfarm Payrolls affect EUR/USD?

Although crude Oil prices came down to levels seen since pre-US-Iran conflict, investors remain concerned over global inflation remaining sticky, mainly due to heightened costs of consumer electronics via AI-driven hardware demand. As a result, the US Dollar (USD) has been outperforming its major rivals, supported by growing expectations for a tighter Fed policy.

Hammack flags broad inflation, keeps rate hike option alive

In an interview with CNBC on Tuesday, Cleveland Fed President Beth Hammack delivered a moderately hawkish message with the FXS Speechtracker score at 6.4/10. 

This is slightly softer relative to the historical average of 7/10 but still signals a tightening bias. By stressing that the job market is “right around full employment” and that growth “looks good,” while warning that “inflation is still too high” and that rate hikes may need to be considered, the speech underscores a willingness to tighten policy despite concerns about the broader economy. 

According to the CME FedWatch Tool, markets are currently pricing in about a 34% probability of the Fed raising the interest rate by 25 basis points (bps) as early as July, compared to a 6% chance seen in early June. Moreover, the probability of at least two rate increases by the end of 2026 now sits slightly above 40%.

Another positive surprise of 130K or higher in the headline NFP could feed into July rate hike projections and fuel another leg higher in the USD. In this scenario, EUR/USD could remain under bearish pressure and extend its downtrend in the near term. 

On the other hand, a significantly disappointing print below 70K could trigger an upward correction in the pair. However, a steady bullish reversal is unlikely to materialize unless Fed policymakers shift their tone and put more emphasis on labor market conditions rather than the inflation outlook. 

Given three consecutive months of very strong prints, however, a single NFP miss is likely to be overlooked, keeping any potential rebound in EUR/USD short-lived.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“EUR/USD’s near-term technical outlook doesn’t point to oversold conditions and suggests that the bearish bias stays intact. The Relative Strength Index (RSI) indicator on the daily chart remains below 40 after recovering from oversold territory and the pair trades slightly above the lower arm of the Bollinger Band.”

“On the downside, 1.1320-1.1280 (lower arm of the Bollinger Band, static level) forms the first support ahead of 1.1160 (static level) and 1.1000 (psychological level, static level).”

“Looking north, a strong resistance area could be spotted at the 1.1485-1.1500 region (20-day Simple Moving Average (SMA), round level) before 1.1600 (round level, 50-day SMA) and 1.1650-1.1660 (200-day SMA, descending trend line, 100-day SMA).”

(This story was corrected at 09:16 GMT to say in the subheading "How will the US June Nonfarm Payrolls affect EUR/USD?" instead of May.)