Weekly Wrap-up: Resilient Dollar Tugs-of-War, Tariff Tensions and a Goldilocks Jobs Print (30 June – 4 July 2025)
Weekly Wrap-up: Resilient Dollar Tugs-of-War, Tariff Tensions and a Goldilocks Jobs Print (30 June – 4 July 2025)
1. Executive Overview
An event-packed U.S.-centric week set the tone for global macro flows. Payrolls beat forecasts, the Senate advanced a sizeable tax-and-spend bill and President Trump dialed tariffs rhetoric up then down in dizzying succession. These cross-currents ricocheted through currencies and commodities: the dollar swung from multi-month lows back to strength, EUR/USD surrendered record gains, and gold punched higher before settling. Beneath the surface, softer private-sector hiring, contracting U.S. consumer spending and political gridlock kept recession whispers alive.
2. Macro Backdrop – Key Data & Policy Signals
U.S. labour market:
Non-farm payrolls +147 k vs. 110 k expected; unemployment ticked down to 4.1 %.
Private hiring a tepid +74 k, exposing a public-sector skew.
Average earnings growth cooled to 3.7 % y/y.
High-frequency gauges:
ISM services inched up; manufacturing still sub-50.
MBA mortgage applications +2.7 %; JOLTS job openings 7.77 mn, far above consensus.
Inflation & spending: PCE core for May accelerated to 2.7 % y/y even as personal income dropped 0.4 % and real consumption slipped – a stagflation-flavoured divergence.
Central-bank rhetoric:
Fed Chair Powell stayed cautiously data-dependent; Governor Bostic warned tariffs could prolong inflation.
ECB officials flagged downside risks, while BoE’s Taylor hinted at a 2026 hard-landing scenario.
Politics & trade: The Senate passed Trump’s expansive fiscal bill; Vietnam secured a 20 % tariff compromise, yet Canada talks collapsed over a digital-services tax. Traders marked the 9 July tariff deadline as the week’s binary risk.
3. Currency Market Dynamics
Dollar Index (DXY)
Fell early week on dovish rate-cut bets, reversed sharply after payrolls.
Two-year Treasury yield retraced 8 bp, mapping the same round-trip.
EUR/USD
Stretched to 1.1830 – its highest since 2021 – before rolling over as widening U.S.–German yield spreads re-asserted.
Daily chart (page 2 of 2 July report) shows an inverted hammer, hinting temporary exhaustion.
GBP/USD
Sterling tagged a 45-month high at 1.3787 but was yanked down by a gilt rout and bleak U.K. current-account numbers. Support at the 10-DMA (≈ 1.3630) survived.
USD/JPY
The yen lost its haven luster as energy-led inflation fears flared and BOJ’s Ueda reiterated ultra-easy policy; volatility skews reflect growing downside-protection demand.
High beta & EMFX
CAD firmed on surging crude, then recoiled after Trump terminated talks with Ottawa.
CNH drifted; PBoC guidance stayed reactive not proactive.
4. Commodities & Rates
Gold (XAU/USD)
Rallied to 1,348 before mean-reverting; 200- and 50-day MAs on the hourly chart (page 2 of every daily PDF) remain sloped up, underscoring medium-term bid.
Crude oil (WTI)
+3 % spike mid-week on OPEC+ chatter of a 411 kb/d August hike, but pared back with weaker U.S. demand prints.
Rates
U.S. curve bull-flattened; 2s10s narrowed to +52 bp. Gilts sold off 15–20 bp amid fiscal angst. Bunds bid on softer German CPI (2.0 % y/y).
5. Event-Risk Matrix (Forward-Looking)
Tariff countdown (9 Jul): binary for risk assets; a negotiated climb-down could fuel further EUR and EM rebound, while hard tariffs risk a dollar spike and equity drawdown.
Services PMI trifecta (Eurozone, UK, US – 3 Jul): watch for divergence; the UK services surprise has outsized GBP impact.
Sintra ECB Forum & global CB speak: any push-back on easing bets may cap gold.
Friday 11 Jul U.S. CPI: consensus 0.3 % m/m; a miss reignites cut expectations.
6. Best Takeaways & Strategy Colour
“Good-but-not-great” payrolls are risk-friendly until private-sector softness snowballs.
The tariff clock trumps the rate-cut clock. Options skew shows traders willing to buy dollar topside as insurance.
Gold remains the convex hedge – supported by negative real yields and policy uncertainty.
Carry vs. volatility: USD/JPY carry still attractive, yet tail risk of a BOJ policy surprise creeps higher into Q3.
Stay nimble: with conflicting macro signals, keep position sizing dynamic (vol-scaled, Kelly-dampened) and bias for mean-reversion in overstretched pairs such as EUR/USD above 1.18.
