US dollar edges higher after last week’s losses

Today’s headlines

What’s happening: The US dollar rose this morning after notching the steepest weekly decline in more than two months.

What happened: The greenback remained close to a two-week low with investors scaling back speculations of an interest rate hike by the Federal Reserve this year.

The Japanese yen remained close to a 40-year low against the US dollar.

Why it matters: The US dollar notched its biggest weekly decline last week since April following the release of data that showed jobs growth eased sharply in June. US nonfarm payrolls rose by 57,000 in June, significantly below market estimates of 110,000.

The latest jobs data followed a streak of strong job growth and led to investors scaling back speculations of the Federal Reserve hiking its benchmark interest rates in September.

Meanwhile, a continuous decline in crude oil prices helped ease inflationary concerns, as energy shipments through the Strait of Hormuz continued to recover, helping key Persian Gulf producers increase their exports. Saudi Arabia’s shipments surged close to pre-conflict levels, while the UAE also saw a jump in its export flows.

The USD/JPY forex pair rose around 0.3% to 161.80 this morning. The Japanese yen hovered just off the 1986 lows of 162.84 it reached last week, as investors remained concerned about a possible intervention by the Bank of Japan.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.1% to 100.96 this morning.

The EUR/USD forex pair slipped to 1.1433, not far from its highest reading in two weeks, while the GBP/USD pair declined 0.1% to 1.3342 this morning.

What to watch: Investors will keep an eye on the negotiations between the US and Iran.

The minutes from the Fed’s June meeting, due to be released this week, will also remain in focus. Data on S&P Global composite PMI (1745 UAE Time), S&P Global services PMI (1745 UAE Time) and ISM services PMI (1800 UAE Time) will be released today. The S&P Global composite PMI is expected to climb to 52.2 in June from 51.5 in the previous month, while services PMI is projected to rise to 51.3 in June from 50.7 in May. The ISM services PMI, which rose to 54.5 in May from 53.6 in the previous month, is expected to decline to 54.2 in June.

The markets today

European stocks in focus today ahead of some major economic reports

Context: Equity markets in Europe surged to record highs on Friday as investors digested the latest economic data.

Details: Data released on Friday showed that the Eurozone’s services PMI business activity index climbed to 49.4 in June from 47.7 in the previous month. The figure was also higher than a preliminary reading of 48.9. Although the latest reading came in higher than market estimates of 48.5, it marked the softest downturn in the region’s services sector since the start of the US-Iran war.

The S&P Global Eurozone composite PMI rose to 50.0 in June from a preliminary reading of 49.5. The figure also came in higher than May’s 48.5. The latest reading signalled a stabilisation in private sector output after two months of decline.

Other data released showed solid growth in Spain’s services sector, while the recovery in Italy’s services sector disappointed. Although Germany’s services PMI for June was revised higher to 48.6, from a preliminary reading of 46.8, it remained in the contraction zone for the third consecutive month. France’s services PMI climbed to 46.8 in June from 44.3 in May, recording its first rise since February.

The STOXX Europe 600 Index gained 0.68% to close at 652.77, while the FTSE 100 rose 0.25% to settle at 10,679.03. Germany’s DAX 40 climbed 0.78% to 25,779.31 and France’s CAC 40 added 0.39% to settle at 8,508.07 on Friday.

What to watch: Investors will continue monitoring developments in the US-Iran peace talks.

Data on the Eurozone’s retail sales (1300 UAE Time) and PPI (1300 UAE Time) will be released today. Retail sales volumes in the Eurozone, which declined 0.4% in April, are expected to grow by 0.2% in May. Analysts expect producer prices in the Eurozone to rise by 0.2% in May following a 0.6% rise in April.

Other Markets: Asian indices traded mixed this morning, with Japan’s Nikkei 225 and China’s CSI 300 down by 1.18% and 0.75%, respectively, and Hong Kong’s Hang Seng index up by 0.95%.

The news shaping the markets

Russia launched a major attack with ballistic missiles on Kyiv a day after US President Donald Trump called Vladimir Putin and Volodymyr Zelenskyy to discuss ending the ongoing war. The news sent the USD/RUB pair lower in forex trading this morning.

Australia’s ANZ–Indeed job ads fell 0.2% in June, following a 2.0% rise in May, which exerted pressure on the AUD/USD forex pair.

Hong Kong’s S&P Global SAR PMI rose to 52.0 in June from 50.4 in the previous month. The latest reading signalling the strongest growth in the private sector since February sent the USD/HKD pair lower in forex trading this morning.

Saudi Arabia’s Riyad Bank PMI climbed to 53.3 in June from 52.8 in the previous month. This being the third straight month of growth in the non-oil private sector exerted pressure on the USD/SAR forex pair.

Brazil’s S&P Global composite PMI grew to 50.7 in June from 49.5 in the previous month, which sent the USD/BRL pair lower in forex trading this morning.

What else to watch today

UK’s new car sales (1200 UAE Time) and S&P Global construction PMI (1230 UAE Time), Mexico’s gross fixed investment (1600 UAE Time) as well as Canada’s S&P Global composite PMI (1730 UAE Time), S&P Global services PMI (1730 UAE Time), Bank of Canada’s business outlook survey (1830 UAE Time) and BoC’s survey of consumer expectations (1630 UAE Time).