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Tuesday, August 05, 2025
What’s happening: The US dollar recovered slightly on Monday, after recording losses last week.
What happened: The US dollar remained under pressure last week due to disappointing jobs data and President Donald Trump’s moves to force the Federal Reserve to cut interest rates.
Despite the pressure last week, the US dollar ended July in the black, its first monthly gain in 2025.
Why it matters: Data released on Friday showed weaker-than-expected job growth in July. Nonfarm payrolls rose by 73,000 in July, versus market expectations of 110,000.
The US unemployment rate edged higher to 4.2% in July, from 4.1% in the previous month, although this came in-line with market estimates.
Trump fired the Bureau of Labor Statistics commissioner Erika McEntarfer on Friday, accusing her of manipulating job figures.
Last week, the Federal Reserve had kept interest rates unchanged in the 4.25%-4.50% range. Fed Chairman Jerome Powell said that no decision had been made regarding the policy decision in September.
Trump criticised the Fed’s policy decision and called upon Powell to cut interest rates to boost the US economy.
Fed Governor Adriana Kugler surprisingly announced his resignation effective August 8, which would give the US President the chance to pick Powell’s successor earlier than projected.
This triggered speculations of the US central bank cutting rates by 25bps in September and by another quarter percentage point by yearend.
Trump also announced higher tariffs on exports from several trading partners, including Canada, India and Brazil.
The latest developments weighed on the US dollar last week, sending the USD/JPY forex pair lower by more than 2% and the USD/EUR by 1.5% on Friday.
The US dollar gained 3.4% in July, recording its biggest monthly surge since April 2022 and its first monthly gain of 2025.
The greenback recovered on Monday, after steep declines last week. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose more than 0.1% to 98.78.
The EUR/USD forex pair fell 0.1% to 1.1574. The US dollar also recorded gains versus the Swiss franc after Trump announced some of the highest tariffs on Switzerland.
What to watch: Investors will continue monitoring tariff-related announcements from US President Donald Trump.
Data on balance of trade (1630 UAE Time) and ISM services PMI (1800 UAE Time) will also remain in focus. The US trade gap, which rose to $71.5 billion in May from $60.3 billion in the previous month, is expected to narrow to $61.6 billion in June. Analysts expect the ISM services PMI to surge to 51.5 in July from 50.8 in June.
Context: Equity markets in Asia traded mostly higher this morning as investors digested the latest economic reports.
Details: Data released this morning showed that the Caixin China general services PMI had surged to 52.6 in July, from 50.6 in the previous month. The figure also topped market estimates of 50.4. The latest reading represented the fastest growth in services activity since May 2024.
Hong Kong’s S&P Global SAR PMI rose to 49.2 in July, from 47.8 in the previous month to record the strongest reading in six months. The S&P Global Japan services PMI also climbed to 53.6 in July, from 51.7 in the previous month. The figure also came in higher than the flash reading of 53.5, signalling growth in services sector for the fourth month in a row.
Meanwhile, minutes from the Bank of Japan’s June meeting showed that the central bank will increase rates further in case economic growth and inflation progress as projected. Most bank officials favoured keeping interest rates steady for now, due to uncertainty over trade tariffs.
Japan’s Nikkei 225 gained 0.52% to trade at 40,501.22 this morning, while Hong Kong’s Hang Seng Index traded almost flat at 24,731.79. China’s Shanghai Composite index climbed around 0.46% to 3,599.76.
What to watch: Data on average cash earnings (0330 UAE Time) and overtime pay (0330 UAE Time) from Japan, scheduled for released on Wednesday, will remain in focus. Nominal wages in Japan, which rose 1.4% year-over-year in May, are expected to surge by 3.2% in June. Analysts expect overtime pay to rise by 0.8% year-over-year in June following a 1.4% gain in the previous month.
Tariff-related announcements from Trump are also expected to impact Asian equity markets ahead.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.34%, 1.47% and 1.95%, respectively.
US President Donald Trump announced plans to send his special envoy, Steve Witkoff, to Russia again, to continue negotiations on the ongoing war in Ukraine. The news sent the RUB/USD pair lower in forex trading this morning.
Philippines’ annual inflation rate eased to 0.9% in July, from 1.4% in the previous month, lending support to the PHP/USD forex pair.
Australia’s household spending rose by 0.5% in June, compared to a 1.0% gain in the previous month. Household spending rising for the second straight month sent the AUD/USD pair higher in forex trading this morning.
Brazil’s economy added 166,621 formal jobs in June, up 8.77% from the previous month, which lent support to the BRL/USD forex pair.
Mexico’s consumer confidence surged to 45.9 in June, from 45.5 in May. However, the MXN/USD pair edged lower in forex trading this morning.
Eurozone’s HCOB composite PMI (1200 UAE Time), HCOB services PMI (1200 UAE Time) and PPI (1300 UAE Time), UK’s new car sales (1200 UAE Time), S&P Global composite PMI (1230 UAE Time), S&P Global services PMI (1230 UAE Time) and Treasury Gilt 2035 auction (1300 UAE Time), Spain’s 12-month Letras auction (1240 UAE Time) and 6-month Letras auction (1240 UAE Time), Germany’s 2-year Schatz auction (1330 UAE Time), Brazil’s S&P Global services PMI (1700 UAE Time), S&P Global composite PMI (1700 UAE Time) and Brazil Central Bank’s Copom meeting minutes (1500 UAE Time), Mexico’s gross fixed investment (1600 UAE Time), Canada’s balance of trade (1630 UAE Time), as well as US Redbook index (1655 UAE Time), S&P Global composite PMI (1745 UAE Time), S&P Global services PMI (1745 UAE Time), RCM/TIPP economic optimism index (1810 UAE Time), total household debt (1900 UAE Time), 52-week Bill auction (1930 UAE Time) and 3-year Note auction (2100 UAE Time).
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