The euro traded with mixed momentum against the US dollar during the Asian session, consolidating near 1.1785 — the highest level since September 2021. The greenback continues to lose ground as market participants worry about the Federal Reserve’s policy independence. Last week, Fed Chair Jerome Powell addressed Congress, indicating he supports a rate cut later this year, while the White House advocates for an immediate dovish shift. As a result, market odds for a September rate cut have risen to 26% from 12-13% just weeks ago. Consensus now expects a 25 basis point cut in September if inflation remains contained and the US labor market shows no signs of distress.

This Thursday at 14:30 (GMT+2), attention will focus on June’s US non-farm payrolls: forecasts suggest job creation will slow to 110,000 (from 139,000), average hourly earnings will ease to 0.3% m/m (from 0.4%), and annual wage growth will remain at 3.9%, while unemployment could rise to 4.3%. Service sector PMI data from S&P Global (15:45) and ISM (16:00) will also be closely watched, with the ISM index expected to rise from 49.9 to 50.5.

Meanwhile, Germany’s June CPI slowed from 2.1% to 2.0% y/y, flat m/m (vs. 0.2% forecast), further evidence that the ECB has largely tamed inflation, opening the door for policy alternatives as rates approach 2%. Investors see at most one more rate cut from the ECB this year. Today, eurozone inflation data at 11:00 (GMT+2) is forecast to show core HICP at 2.3% and headline CPI up from 1.9% to 2.0%.

Forex GBP/USD: Sterling Presses Higher Amid Dovish Dollar

The British pound continues to advance against the US dollar, testing resistance at 1.3745 as it attempts to break above last week’s highs on persistent greenback weakness. Market focus today will be on Fed Chair Powell’s testimony (15:30 GMT+2), after last week’s comments signaled a likely rate cut later in 2025, though Powell noted inflation remains pressured by elevated US tariffs. This backdrop has led traders to price in a 25bp Fed cut in September, and possibly two or three more by year-end.

Key UK data today includes S&P Global manufacturing PMI at 10:30 (expected unchanged at 47.7), and an address by Bank of England Governor Andrew Bailey at 15:30, though no major policy signals are expected. Recent data showed May consumer credit contracted to £0.859bn (vs. £1.1bn forecast), net lending rose to £2.91bn (from £1.17bn), and mortgage approvals increased to 63,032 (vs. 58,750 expected).

NZD/USD: Kiwi Hits New Highs Amid Dollar Skepticism

The New Zealand dollar is pushing higher, breaking through 0.6100 and targeting fresh October highs. The bullish trend is supported by ongoing doubts over US Fed policy and robust domestic/Chinese data. Investors remain wary after President Trump’s criticism of Powell’s “independent” monetary stance last week in Congress, as markets now expect a Fed rate cut by September.

Local tailwinds include NZIER business confidence for Q2 rising from 19.0% to 22.0%, May building permits up 10.4% m/m (vs. –14.6% previously), and strong Chinese PMI prints: Caixin manufacturing at 50.4 (vs. 48.4), NBS manufacturing at 49.7 (from 49.5), and services at 50.5 (from 50.3).

USD/JPY: Dollar Retreats, Yen Rallies on Strong Japanese Data

The US dollar is weakening against the Japanese yen, breaking below 143.60 as last week’s bearish momentum continues. Yen strength is underpinned by solid macro data: Japan’s Tankan all-industry index jumped to 11.5 (from 3.1), large manufacturer index rose to 13.0 (from 12.0), beating consensus (10.0). June consumer confidence rose to 34.5 (vs. 32.8 prior and 33.6 expected). However, ongoing trade negotiations with the US remain a headwind, with seven rounds of talks producing little progress as a mutual tariff moratorium expires July 9.

Fed Chair Powell’s testimony (15:30 GMT+2) and global manufacturing PMIs later in the day (15:45/16:00) could set the next directional moves. The base case remains a 25bp Fed rate cut in September.

XAU/USD: Gold Extends Gains as Dollar Softens

Gold (XAU/USD) posted moderate gains in early trading, breaking above $3,330 as the “bullish” momentum from late last week continues. Traders are watching for new catalysts, including Powell’s comments today and US jobs data later this week. Markets have increased their bets on imminent Fed easing; expectations now point to two or three cuts by year-end, barring a surge in inflation. Key macro data — S&P Global and ISM PMIs, as well as Thursday’s jobs report — could provide fresh volatility.