EUROPEAN FX UPDATE: Flat trade ahead of US jobs, CHF underpinned on above-forecast Swiss CPI

USD: DXY U/C; 96.71

• Flat intraday in typical pre-NFP trade and with attention on deliberations stateside as President Trump's "One Big Beautiful Bill" makes its way through the House, with the vote expected between 10:30-11:30 BST.


• June NFP is expected to show 110k jobs added (range: 50-160k), down from 139k in May. NOTE: The Bloomberg "whisper" is for 96k, based on 436 estimates. The unemployment rate is expected to rise to 4.3% (range: 4.2-4.4%) from 4.2%, still below the Fed’s 2025 median estimate of 4.5%. Average hourly earnings are forecast to rise by 0.3% M/M (range: 0.2-0.3%), slowing from 0.4%, with annualised growth seen steady at 3.9% Y/Y (range: 3.7-3.9%). (Full Preview Available on Newsquawk)


• ING does not believe that the FX market has reached "peak bearishness" on the USD, despite widespread negative sentiment and forecasts. While they remain bearish on the dollar over the coming quarters, ING notes that the key risk yet to materialise is the prospect of an early Fed rate cut. Fed Chair Powell currently favours keeping rates on hold due to persistent inflation and a solid labour market, but any downside surprise in the upcoming US jobs report could increase pressure for a rate cut as early as July, with markets currently assigning a 26% probability to that outcome.


• DXY resides in a narrow 96.69-96.88 range and within yesterday's 96.62-97.16, with any large miss in NFP likely to take the index to sub-96 levels, according to some desks.

EUR: EUR/USD U/C: 1.1803

• Similarly flat and on either side of the 1.1800 mark as traders await the next catalyst, with little move seen from the final PMI releases, which are somewhat less relevant given Trump's tariff negotiations deadline next week.


• Overnight, it was also reported that ECB officials question whether the euro has strengthened too much, as policymakers at the central bank fret that a surging currency increases the risk of inflation undershooting.


• Note, European Commission President von der Leyen is to face a European Parliament vote of no confidence on Thursday, although the vote is mainly symbolic as the majority of political groups have already signalled that they will vote against the motion of no confidence, according to officials cited by POLITICO.


• EUR/USD found resistance at yesterday's high, currently sits in a tight 1.1787-1.1809 parameter vs yesterday's 1.1746-1.1809 range, with the next upside level the upside 1.1829 set on Tuesday.

JPY, CHF: USD/JPY +0.1%; 143.84; USD/CHF -0.1% 0.7918

• Mixed trade across the traditional haven FX amid a lack of macro catalysts this European morning, ahead of the US jobs report.


• USD/JPY lacked conviction overnight amid the flimsy risk appetite in the region and in the absence of tier-1 data releases from Japan, while there was also a deluge of somewhat mixed comments from BoJ's Takata, who stated the price stability target is close to being achieved and the BoJ should continue to further adjust the degree of monetary accommodation if it can confirm the positive corporate behaviour is being maintained, but also noted the BoJ needs to maintain its current accommodative monetary policy stance to maintain momentum toward hitting its price target.


• JPY saw little move on Japan Trade Union Rengo, stating final data shows average wage hike of 5.25% for fiscal 2025 (prev. 5.10% hike in 2024).


• USD/JPY trades in a 143.45-143.93 range.


• CHF is slightly firmer following above-forecast Swiss CPI metrics, albeit marginally.

GBP: GBP/USD +0.3%; 1.3672

• On a slightly firmer footing following yesterday's volatility due to uncertainty regarding UK Chancellor Reeves, although with reprieve felt after UK PM Starmer voiced support for Reeves and suggested she will be the Chancellor for years to come and will be the Chancellor at the next election. Furthermore, the UK PM said the UK government is committed to fiscal rules and economic stability.


• GBP/USD currently resides in a 1.3620-1.3675 range, well within yesterday's 1.3560-1.3752 parameter.

Antipodeans: AUD/USD -0.1%; 0.6580. NZD/USD -0.1%; 0.6077

• Marginally softer amid the broader cautious sentiment and following mostly weaker Australian trade data overnight.


• Gains may also be capped by yesterday's US-Vietnam deal, which includes a 20% tariff on Vietnamese goods exported to the US and a 40% tariff on goods deemed to be transshipped through Vietnam, potentially affecting some Chinese goods passing through the country, although details of the deal are still being finalised according to recent reports.

03 Jul 2025 - 10:00- ForexData- Source: Newsquawk