USD: All focus on data – and soon, tariffs – ING

Fed Chair Jerome Powell stuck to his usual cautious tone in Sintra, reiterating a strict data-dependent approach that is set to keep the dollar extremely sensitive to jobs and inflation figures. Notably, Powell refused to rule out a July rate cut, so a sharp payrolls miss tomorrow would give markets license to price in easing as soon as this month, ING’s FX analyst Francesco Pesole notes.

Risks remain skewed to the downside for the Greenback

"But the bits of US data released yesterday pointed in the opposite direction – giving the dollar some brief support. May JOLTS figures beat expectations across the board – job openings and quits increased, layoffs fell, all contradicting the consensus. The ISM manufacturing index also surprised to the upside, rising from 48.5 to 49.0, with 'prices paid' rebounding after May’s dip. These are not decisive signals, but they point toward higher prices and a resilient labour market – hardly a case for imminent Fed action. We see markets as having leaned too far on the dovish side and expect the dollar to find support as inflation picks up."

"Meanwhile, the US Senate narrowly passed its revised version of Trump’s Big Beautiful Bill Act, which is now back to the House for final clearance before being signed into law. Despite the Congressional Budget Office now estimating an upwardly-revised $3.3tr addition to net debt over the next decade, the reaction in Treasuries has been muted, likely cushioned by hopes of earlier Fed easing. Still, if inflation surprises on the upside, a delayed impact on US bonds cannot be ruled out."

"Dollar downside risks are slightly reduced after yesterday’s data, but things can change rapidly should today’s ADP payrolls surprise on the soft side. Consensus is for a rebound to 96k from 37k. Challenger job cuts will also be in focus. Trade tensions are returning to the spotlight as well. President Trump has signalled no extension of reciprocal tariffs beyond 9 July, though markets are wary of taking this at face value given recent reversals. The prevailing view may be that global tariff threats peak before another last-minute reprieve, but this time markets may focus more on bilateral risks for countries like Japan, Canada, or the EU. Anyway, even targeted tariffs have weighed on the dollar in the past, and – setting aside US data – risks into the 9 July deadline remain skewed to the downside for the greenback."