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Is non-farm in June just an "interlude" of the US dollar downward?
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Hello everyone, today XM Forex will bring you "[XM Forex Official Website]: June non-farm may just be the "interlude" of the US dollar downward?". Hope it will be helpful to you! The original content is as follows:
Asian market market
On Thursday, the risk aversion sentiment was boosted due to market concerns that the conflict between Iran and Israel was escalated, and the US dollar index hit the 99 mark during the session. As of now, the US dollar price is 96.88.
① US Treasury Secretary Bescent warned countries not to delay trade negotiations, and tariffs could rise to the level on April 2. It is expected that about 100 countries will receive at least 10% reciprocal tariffs. Trump will decide whether to extend the July 9 deadline; if the euro hits 1.2 against the dollar, Europeans will yell, ensuring that the dollar will continue to be the global reserve currency. ② The EU aims to reach a "principle agreement" with the Trump administration before July 9, ③ Japanese Prime Minister Shigeru Ishiba said that Trump may be misled on the tariff issue. ④ Indonesia will sign a memorandum of understanding on trade and investment with the United States at US$34 billion. ⑤ Canadian Treasury Secretary: If you can negotiate an optimal trade agreement with the United States, there will be no more digital taxes.
The non-farm employment population in the United States increased by 147,000 after the seasonal adjustment in June, better than expected, and the unemployment rate unexpectedly fell to 4.1%. Traders no longer bet on the Fed's interest rate cut in July, and the probability of a rate cut in September has declined.
Trump will send a letter to trade partners on Friday local time to inform unilateral tariff rates.
The US "Big and American" bill was passed by the House of Representatives after two Republican lawmakers turned against each other, and Trump will sign the bill early Saturday morning.
Trump and PutinThe call was held to discuss the situation in the Middle East, Russia-Ukraine negotiations, etc. Trump also plans to talk to Zelensky on Friday to discuss military aid issues.
Japan Atlanta Fed Chairman Bostic: The U.S. economy may experience a longer period of high inflation.
Bester: If the Fed does not cut interest rates now, the decline in September may be even greater, and the selection of new chairpersons will be started in the fall.
People familiar with the matter revealed that U.S. Special Envoy for the Middle East is Witkov, who plans to meet with Iranian Foreign Minister Aragzi in Oslo next week to restart nuclear negotiations; Iran's deputy foreign minister: he does not intend to retaliate against the United States, but will continue to enrich uranium.
British Prime Minister Stamer expressed his confidence in the Chancellor of the Exchequer and emphasized that he would work together.
Demand for Japan's 30-year Treasury bond auctions is strong, with bid multiples hitting a new high since February.
Japan's salary negotiations in fiscal 2025 ended with an average increase of 5.25%, exceeding the 5.10% increase in fiscal 2024, setting the highest increase in 34 years.
Summary of institutional views
Morgan Stanley: The US dollar is just a half-time break, and a larger depreciation storm is xmh100.coming. Maintaining the European, American, US and Japan goals
Unlike many investors, we believe that the weakening trend of the US dollar is at a half-time break, not an end. What impact will the 20% net depreciation of the US dollar (as we expect) have on the broader economy and markets? We expect the US dollar to continue to weaken, driven by convergence of U.S. interest rates with other major currencies around the world and a further rise in foreign exchange hedging risk premiums. At present, the US dollar is still at the upper limit of the historical range, and the pro-cyclicality brought about by hedging and index rebalancing are important amplification factors.
The recent weakening of the US dollar has limited impact on the economy, but further depreciation may push up overall CPI and GDP. We expect that for every 1% depreciation of the US dollar, US CPI and GDP will rise by 5 basis points. A weaker dollar is a huge and undervalued positive for U.S. stock earnings, especially for large stocks with higher overseas earnings. Forex hedging can affect the xmh100.company's ultimate U.S. dollar exposure, but limited information disclosure makes it challenging to predict U.S. dollar exposure.
We maintain long euros against the US dollar around 1.17, with a target of 1.20, with a stop loss set at 1.07; and maintain short US and Japan at 145, with a target of 135, with a stop loss set at 151.
BrandywineGlobal Senior Research Analyst Kevin O'Neil
The bond market clearly did not expect such a strong job report, including an upward revision of employment data in the previous two months. Although the slowdown in inflation continues to support the Fed's rate cut, the 4.1% unemployment rate significantly reduces the urgency of taking positive action. It is worth noting that employment growth is mainly from government departments, which has slowed down in employment growth this year, partly due to government measures. In terms of bond market trends, today's data may help reverse the steepening momentum of the yield curve in recent weeks.
Simon Dangoor
Today's strong non-farm employment data confirms that the U.S. labor market is still resilient, at least temporarily reversing signs of weakness shown by some leading indicators. This will undoubtedly strengthen the Fed's FOMC's determination to maintain a wait-and-see stance, especially as it prepares for the possible acceleration of inflation in the summer. But we still believe that the Fed may restart the easing cycle later this year if summer inflation accelerates weaker than expected or labor market weakness exceeds the lower threshold suggested by the dot chart.
Citi: Tariff deadlines may be "insignificant" for G10 Forex, but pay attention to Japan
Citi Forex strategists believe that, to a large extent, the upcoming July 9 tariff negotiation deadlines may be "insignificant" for G10 Forex. On the EU side, Citi's basic forecast is that the two sides will reach an agreement framework by July 9, when the 10% tariff rate will be extended and negotiations will continue. "Given the recent strengthening of the euro, they speculate that such news will be slightly positive for the euro, but it is not necessarily an important driving factor, as a lot of good news has been reflected in the euro price." On the issue of Japan, Citi believes that the possibility of a deal is declining given Trump's recent remarks. "The risk of a hike in Japan's tariffs seems to be the highest," Citi said. The bank expects the U.S. and Japan to climb to 150 this summer before falling below 140 later this year, as the yen will return to strength as the Bank of Japan expects to implement policy normalization.
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