EUROPEAN FX UPDATE: USD sluggish at the start of a shortened, but busy week

USD: DXY -0.1%; 97.18

• DXY has kicked the week, month-end, quarter-end and half-year-end off on a mildly negative footing after a run of five consecutive losses last week. DXY has in part been tracking the downside in the US rates space after dovish musings from the Fed last week as well as being caught up in what some deem as a secular decline for the USD. Focus on the news cycle for the US has been on the Senate's 49-51 vote to open up the debate on Trump's tax cut bill; full vote could come as soon as today. Note, US yields are relatively calm despite the increased price tag of the bill. Attention has also been on the trade front after the US and Canada resumed trade talks. Trump also warned that he doesn't expect to extend the July 9th tariff deadline. That being said, those who endorse the TACO trade are expecting some flexibility on this front. Note, this week is a holiday-shortened week but one which is packed with tier 1 data, the notable highlight being Thursday's US NFP release. As it stands, a July cut is priced as 21% with the next 25bps reduction fully priced by September. DXY briefly hit a multi-year low @ 96.97 before returning to a 97 handle.

EUR: EUR/USD U/C: 1.1719

• EUR/USD flat after fading initial gains, which saw the pair top out @ 1.1750 vs. Friday's multi-year high @ 1.1753. Focus in the early stages of the week for the Eurozone will be on the inflation front with EZ CPI due tomorrow. Ahead of which, last Friday saw hotter-than-expected outturns for Spain and France. Regional metrics from Germany have been mixed/soft ahead of the nation-wide release later, which is expected to show a minor uptick in inflation. That being said, the data is unlikely to have a material sway on ECB pricing which current sees around 24bps of easing by year-end. As the July 9th tariff pause deadline approaches, focus is also on the trade agenda. Note, last week, WSJ reported that the EU was considering reducing tariffs on US goods in an attempt to "woo" the US. That being said, US President Trump remains critical of the EU's toughness in negotiations.

JPY: USD/JPY -0.4%; 144.15

• JPY is top of the G10 leaderboard after struggling to make as much headway vs. the USD relative to peers last week. There is no obvious driver behind the outperformance. Macro drivers for Japan since Friday have leaned more on the negative direction with comments from US President Trump that Japan takes in no American cars and its vehicles should be subject to a 25% auto tariff in the US. In response, Japan's Tariff negotiator Akazawa says they will continue working with the US to reach a tariff agreement, while defending national interests. Elsewhere, Japanese Industrial Production for May fell short of expectations. USD/JPY is back below its 50DMA @ 144.39 and has delved as low as 143.79; currently holding above the 26th June low @ 143.75.

GBP: GBP/USD -0.1%; 1.3694

• GBP marginally softer vs. the USD and EUR with incremental macro drivers for the UK remaining on the light side. This could remain the case with the UK macro calendar lacking in notable highlights this week. On the speaker slater, BoE Governor Bailey is due to speak on a policy panel tomorrow at the Sintra forum with Fed Chair Powell, ECB President Lagarde and BoJ Governor Ueda. As it stands, an August rate cut is currently priced at around 73% with a total of 53bps of loosening seen by year-end. Note, some attention may be placed on the UK's fiscal front with the UK government set to release more details about the concessions it has made over proposed welfare changes, ahead of a vote on its reforms on Tuesday (BBC). GBP/USD is currently contained within Friday's 1.3683-1.3752 range.

Antipodeans: AUD/USD +0.1%; 0.6534. NZD/USD +0.2%; 0.6065

• Both are benefitting from the mostly constructive risk tone and after the PBoC set a firmer CNY reference rate. Otherwise, macro drivers are on the light side for both following a mixed batch of Chinese PMI metrics overnight. AUD/USD is currently tucked within Friday's 0.6508-61 range. If upside extends, the YTD peak sits @ 0.6563. NZD/USD briefly breached Friday's 0.6078 high with a current session peak @ 0.6085. YTD high sits @ 0.6087.

30 Jun 2025 - 10:00- ForexEU Research- Source: Newsquawk