The US dollar is displaying limited movement, consolidating within narrow ranges against G10 currencies while slightly softening versus several emerging market currencies. Key developments include the US budget bill’s advancement, notably dropping the "revenge tax" clause, and ongoing discussions over a dozen trade framework agreements ahead of the July 9 deadline. Meanwhile, Canada withdrew its plan to collect from the digital services tax, prompting renewed talks with the US, with hopes for an agreement by July 21. In China, the PMI numbers showed marginal gains, and the PBOC set the yuan’s reference rate at its weakest point since last November.

Asia Pacific Markets

The US dollar remained confined within a tight range against the Japanese yen, fluctuating between JPY143.75 and JPY145.25. This back-and-forth pattern has persisted since mid-May, reflecting little net change. Industrial production in Japan underperformed expectations, with only modest growth so far this year. June's output rose just 0.5%, missing forecasts of a 3.5% increase.
Meanwhile, the Australian dollar recovered from geopolitical jitters, rebounding from $0.6375 to peak near $0.6565, the highest level this year. Despite retracing to the $0.6500 area, market sentiment remains tilted toward an imminent rate cut, with futures pricing in a high likelihood of multiple reductions this year.

European Markets

The euro extended its winning streak into a seventh consecutive session, reaching levels not seen since September 2021. Despite minor profit-taking, it maintained a strong position, trading between $1.1710 and $1.1750. Eurozone data showed steady money supply growth and slightly stronger credit activity, with Germany projecting a significant rise in its fiscal deficit driven by defense and infrastructure spending.
Meanwhile, the British pound saw a weekly gain of nearly 2%, though its rally paused heading into the weekend. The UK economy outpaced other G7 countries in Q1, but early Q2 figures hint at a slowdown. Investors are now focused on potential economic stagnation in the near term.

American Markets

The US Dollar Index closed last week near session highs but stayed close to its lowest level since March 2022. After falling by about 2.4% last week, the index remains below key resistance levels and is trading beneath the lower Bollinger Band. Market attention is shifting to upcoming data releases, especially Thursday’s employment report, which is expected to show a slowdown in job creation and a slight uptick in the unemployment rate. Auto sales are also forecasted to decline for a third consecutive month. In bond markets, yields are trending lower, and Fed Chair Powell is scheduled to speak at an ECB event alongside other major central bankers.