The US dollar is showing overall softness, though it has strengthened against the yen and Swiss franc. Weaker US economic indicators, including ADP employment data, ISM services, and the Beige Book, have increased expectations for at least two Federal Reserve rate cuts this year. Many emerging market currencies are also advancing against the dollar. Nevertheless, foreign exchange markets remain relatively quiet with tight trading ranges. Investors are now focused on the European Central Bank’s policy decision, expected to include a rate cut and downgraded economic forecasts, and tomorrow’s key US employment data.

Asia Pacific Markets

In the Asia Pacific region, the Japanese yen remains under pressure. Although the dollar briefly rose against the yen, weaker US data and lower Treasury yields drove the yen higher. However, it found support around the JPY142 level. Japan's real wages continue to decline, with household spending expected to weaken.
Meanwhile, the Australian dollar is attempting to hold above the $0.6500 threshold. Although it broke above in recent sessions, it has failed to sustain those gains. Australia’s trade surplus narrowed as exports declined and imports increased, while household spending showed a modest monthly uptick after a previous decline.

European Markets

The euro held firm above $1.14. Attention is on updated ECB projections, likely to revise growth and inflation down. Forward guidance from ECB President Lagarde is expected to be cautious, with no rate move anticipated in July.
Sterling also gained ground due to broad dollar weakness, reaching levels near $1.3580. However, it remains in a narrow range just below that point. UK economic data showed marginal improvements in auto sales and construction activity, though the latter still signals contraction.

American Markets

The US dollar struggled after a series of disappointing data releases. ADP job growth fell well below expectations, ISM services dipped below the 50 threshold for the first time since mid-2024, and the Beige Book pointed to uncertainty weighing on the economy. These developments pulled the Dollar Index closer to recent lows. A dramatic narrowing of the April trade deficit helped slightly, driven by plunging imports and rising exports. First-quarter productivity dropped while labor costs surged, reflecting underlying economic stress. Although weekly jobless claims may attract attention, the main market focus is tomorrow’s national employment report.