The US dollar hits a low of more than three years again, paying attention to employment data

On the Asian session on Tuesday, the US dollar index hovered around 96.72. This week's US economic data attracted much attention from the market, especially the June non-farm employment report to be released on Thursday. According to a Reuters survey, economists expect 110,000 new jobs to be created in June, down from 139,000 in May, and the unemployment rate may rise slightly from 4.2% to 4.3%. These data will provide key clues to assessing the health of the U.S. labor market and directly impact the Federal Reserve's monetary policy path. In addition, major central banks around the world (Feder Chairman Powell, European Central Bank President Lagarde, Bank of England Governor Bailey, Bank of Japan Governor Kazuo Ueda, and Bank of Korea Governor Lee Changyong) held a group meeting; the European Central Bank held a central bank forum in Sintra.

Analysis of major currencies

U.S. dollar: As of press time, the US dollar index hovered around 96.72. As the U.S. stock index performed strongly in the second quarter of 2025, setting a record high, market sentiment remained positive. As a result, the US dollar (USD) approached a multi-year low as markets expected a substantial increase in fiscal deficits and market participants expected the Federal Reserve to relax more than 50 basis points (bps), pushing the euro to a four-year high. Technically, at the daily level, the US dollar index moving average system is short-selling: 50-day (99.2861), 100-day (101.6780) and 200-day moving average (103.8683) form layer-by-layer suppression. Although the MACD indicator is in the negative range (DIFF-0.5780, DEA-0.4894), the bar chart narrowed to -0.1771, indicating that the action energy is slightly weakened in the short term. RSI (14) is 33.4343, close to oversold area, need to be alertBeware of the risk of technical rebound.

Euro: Euro/USD climbed to an annual high of 1.1780 on Monday as the dollar continued to be hit by the outlook for U.S. budget approval and expected impact from the Trump administration's continued progress on trade deals with major trading partners. On Tuesday, Fed Chairman Jerome Powell will share a panel discussion with ECB President Christina Lagarde, BoE President Andrew Bailey and BoJ Governor Kazuo Ueda. Technically, the EUR/USD trend remains upward, and buyers are accumulating more momentum, as shown by the Relative Strength Index (RSI). Although RSI's regular readings indicate that it is in an overbought zone, readings between 70-80 suggest that they may accelerate before reaching extreme readings. Therefore, the possibility of further increase is optimistic.

GBP: GBP/USD continues to hit a multi-year high of more than 1.3700, and maintained an increase on Monday with thin intraday trading volume. The dollar liquidity continues to be bearish, limiting the downside of the pound. On Monday, the overall UK economic data failed to have an impact on the market, and pound traders will pay attention to the double appearances of Bank of England (BoE) Governor Andrew Bailey and Federal Reserve Chairman Jerome Powell on Tuesday. The two central bank leaders will attend the 2025 Central Bank Forum in the European Central Bank (ECB) held in Sintra, Portugal. Technically, the GBP/USD continued to rise last week, hitting a 44-month high, testing above 1.3770 for the first time. The pair is expected to close for the fifth straight month as the dollar generally weakens. Pound buyers may be overly optimistic as the pound/dollar price quickly surpasses the uptrend line and the price is trading well above 1.3020 near the 200-day index moving average (EMA). The technical vibration indicator is in an overbought area and warning of a possible pullback.

Summary of news in the foreign exchange market

1. Federal Reserve policy path

Powell's Congressional testimony was interpreted by the market as a clear dovish signal. It stated that "if summer inflation does not rebound due to tariff remarks, it will be appropriate to cut interest rates", which directly promoted the shift in interest rate futures pricing. However, Francesco Pesole, strategist at Dutch International, pointed out that the market may be overpriced and loose expectations: "If non-farm employment only slows down moderately, coupled with the possible rebound in inflation in the www.aihuatrade.coming months, it will force investors to pull back some of the bets on interest rate cuts." London Stock Exchange Group data shows that it is currently down in July.The probability of interest rates is only 21%, indicating that the market is more inclined to wait for action in September.

2. Fed Bostic: Still expected the Fed to lower interest rates once this year

Fed Bostic reiterated on Monday that he still expects the Fed to lower interest rates once this year, and pointed out that the Fed still has time to consider the latest data before deciding to take action. Bostic said he expects a rate cut in 2025, "My position is still there", noting that he expects three rates next year. "I think we are actually patient to keep interest rates unchanged for the time being, because the labor market is actually quite stable."

3. Germany's unexpected inflation cooled down in June to reach the European Central Bank target for the first time in nearly a year

The German Federal Statistics Office said on Monday that consumer prices rose 2% year-on-year in June, lower than the 2.1% increase in May. Economists had expected inflation to accelerate slightly to 2.2% in June. For the eurozone's largest economies, the June data showed a mixed situation. Although inflation in France and Spain rose slightly, Italy remained stable. The data are unlikely to prompt ECB officials to change their view that inflation targets are expected to continue to be met this year. Overall inflation data for the 20 countries in the euro zone will be released on Tuesday, with analysts expecting 2%, slightly higher than 1.9% in May. The next meeting of the European Central Bank will be held in July and is expected to suspend interest rate cuts. Since June 2024, the ECB has lowered deposit rates eight times, currently at 2%.

4. US Secretary of Agriculture: Trump may impose tariff exemptions on agricultural products that are not easy to grow in the United States

According to reports, US Secretary of Agriculture Brooke Rollins said that the Trump administration may consider imposing tariff exemptions on goods that are difficult to grow in the United States (such as cocoa beans or coffee). Currently, these goods are included in the scope of www.aihuatrade.comprehensive tariffs, and Democrats attack Republicans to raise costs.

5. Turkish President: Ankara will host the 2026 NATO Summit

Turkish President Erdogan announced on the 30th that Ankara, the capital of Turkey, will host the 20th NATO Summit. Erdogan said at a press conference after the cabinet meeting that day that the 2026 NATO summit will be held in Ankara in July 2026, and Türkiye will host NATO member leaders. Erdogan also introduced his attendance at this year's NATO summit at the press conference. He said Türkiye called for lifting restrictions on trade in defense industrial products within the framework of the NATO alliance. Türkiye joined NATO in 1952. Turkey connects Europe and the Middle East, is an important economy in the region, and has an important impact on the stability of Southeast Europe and the Middle East.

Institutional View

1. Goldman Sachs will be the United StatesGoldman Sachs advanced its forecast for the Fed's rate cut and is now expected to resume interest rate cuts in September rather than December, as the impact of tariffs on inflation "looks smaller than expected." "We believe the chances of a rate cut in September are slightly higher than 50%, and we see several possible paths - lower-than-expected tariff effects, larger anti-inflation effects, weak labor markets or panic caused by monthly volatility," wrote the economic team led by chief economist Jan Hatzius. "We suspect the Fed leadership is consistent with our view that tariffs will only have a one-time impact on price levels." Goldman Sachs expects the Fed to cut interest rates by 25 basis points three times in September, October and December this year, and lower the terminal interest rate forecast to 3-3.25% from the previous 3.5%-3.25%. Analysts added: "No interest rate cuts are expected in July unless the employment data this week is far inferior to expectations."

2. Deutsche Bank: The outlook for the dollar depends on the drivers behind the rate cut bets

www.aihuatrade.commerz analyst Thu Lan Nguyen believes that the outlook for the dollar depends on the reasons behind the Fed's expectation of interest rate hikes. She said that if the bet on interest rate cuts is driven by the impact of inflation on U.S. tariffs is more limited than previously expected, the dollar may rebound in the near term. However, if these expectations are the assumption that the Fed will succumb to political pressure to cut interest rates, the dollar will face further declines. The market generally expects the Federal Reserve to keep interest rates unchanged in July. She said that if any policymaker voted against the proposal and supported the rate cut, it could heighten concerns that the Fed would become more politicized.

3. Institutions: If Lagarde's speech at the central bank forum is biased towards "hawkish", the euro may rise

Analysts said in a report that if ECB President Lagarde expressed doubts about further interest rate cuts at the central bank forum held in Sintra, Portugal, the euro may appreciate further. "While we doubt there will be a clear and obvious shift in her monetary policy perspective, we do think she will articulate her views on the conditions required to maintain current policy levels." Analysts said her remarks may be biased towards "hawkish", prompting markets to cut bets on interest rate cuts and support the euro.

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