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US president Trump upped the ante ahead of a potentially important weekend. Trade talks take center stage and will continue to do so next week now Trump’s BBB made it through Congress. The deadline for the temporarily reduced import levies (to the 10% baseline) lapses July 9th but so far only the UK and Vietnam secured (the contours of a) trade deal. Trump started to send out letters dictating the applicable tariffs to the trade partners that haven’t from today on. According to the man himself, these vary between 10% and 70% with the upper end even being above the highest level announced on Liberation Day (50%). It’s against this backdrop and lacking inspiration from the economic calendar or from US investors (busy celebrating Independence Day) that markets are taking some chips off the table going into the weekend. European stock markets slid a little over 1% and European rates ease a couple of basis points. Bunds marginally outperform vs swap with net daily changes varying between -0.4 bps (30-yr) and -3 bps (2-yr). ECB’s Villeroy supported the bull steepening move with another series dovish comments. While sticking to the official guidance (“ECB is in a good position on rates”) he sees risks for an inflation undershoot increasing, particularly due to the recent euro appreciation. ECB’s Nagel ahead of the European open called for calm: the ECB mustn’t get nervous if prices would temporarily drop below 2%. He’s probably eying the more stubborn above-2% inflation measures including core and services CPI. Euro area money markets in any case aren’t expecting anything from the ECB at the July 24 meeting and rightly so. A full rate cut isn’t priced in before the end-of-year meeting in December. We’re not at all convinced. A trade deal between the US and the EU could for example quickly make those bets outdated. UK gilt yields ease around 1 bp across the curve. They slid up to 8 bps at the long end of the curve after a concerted effort by prime minister Starmer and Chancellor Reeves. They tried to calm a market concerned about Reeves’ exit and potential fiscal slippage. The former explicitly supported Reeves in her position as finance minister after failing to do so in Wednesday’s parliamentary session, leading to a 20 bps yield surge. The latter reaffirmed her commitment to the current set of fiscal rules.

FX markets are as you could have expected: dull. The dollar fails to build on yesterday’s gains, which were already limited to begin with. EUR/USD even appreciates marginally into the 1.177 area. DXY stabilizes around 97. The Japanese yen outperforms on haven flows. USD/JPY returns from 145 back to 144.4. EUR/JPY, after moving beyond the recent highs yesterday to top 170 for the first time since last year is now testing that big figure again. Sterling’s relief rally yesterday is already over. EUR/GBP bounces back to the 0.8630 area. From a technical perspective the pair faces little resistance ahead of the April high at 0.8738.

News & Views

Preliminary Czech inflation numbers for June showed inflation slowing less than expected, from 0.5% M/M to 0.3% M/M (vs 0.2% expected). Annual inflation accelerated from 2.4% Y/Y to 2.9% Y/Y, matching its second highest level since end 2023. Details showed sticky services inflation at 0.5% M/M and 5% Y/Y (from 4.9%) with goods price inflation rising by 0.1% M/M and 1.6% Y/Y (from 0.9%). Energy prices fell by 5% Y/Y (from -6.2% Y/Y) while food prices rose by 5.5% Y/Y (from 5%). Final data will be published by the Czech Statistical Office on 10 July 2025 when the CNB also shares its view on inflation numbers. Minutes of the previous meeting showed central bankers naming core inflation as a key risk given sticky services prices. CNB governor Michl yesterday reiterated that Czech rates are likely to be stable for some time while leaving all options nevertheless open. EUR/CZK initially extended its Q2 decline towards a new YtD low at 24.60.

Hungarian industrial production fell by 1.3% M/M in May, leaving output 2.6% lower compared than a year earlier. YtD, production was 4.1% lower compared to first five months of 2024. Details showed production volume decreasing in most manufacturing subcategories, like the manufacturing of electrical equipment and of food products (weakness in external demand for electric vehicles, beverages and tobacco products). EUR/HUF holds just below the 400 level with key support (YtD low) lingering around at 397.

Gold was firmer on Friday morning and recovered a part of post-NFP losses.

The metal is on track for a weekly gain after being in red for two consecutive weeks that adds to positive signals, as the price remains at the upper side of larger consolidation range ($3500/$3120).

Negative impact from upbeat US labor data was short-lived, with growing fiscal concerns after the US Congress passed President Trump’s tax-cut and spending bill (which will add $3.4 trillion to a massive US debt) expected add pressure on dollar and underpin safe-haven demand.

Technical picture on daily chart is still mixed as near-term action remains supported by thickening daily Ichimoku cloud, but positive signal being countered by 14-d momentum still in negative territory and overbought stochastic.

Near-term bias is expected to remain with bulls while the price holds above $3325 (broken Fibo 38.2% of $3452/$3246) though sustained break above cracked $3350 barrier (50% retracement / daily Kijun-sen) and $3365 (Thursday’s high) required to strengthen near-term structure and shift focus on targets at $3373 (Fibo 61.8%) and $3400 (psychological).

However, Friday’s action is likely to be less dynamic due to lower volumes, as US markets will be shut for Independence Day.

Res: 3345; 3350; 3365; 3373
Sup: 3325; 3311; 3308; 3300

The GBP/USD pair is undergoing a correction, moving towards 1.1627 on Friday, marking its lowest level since 23 June this year.

Strong US jobs data puts pressure on the pound

The pound came under renewed pressure after the release of a strong US employment report, which boosted demand for the US dollar.

Earlier in the session, the pound received support from Prime Minister Keir Starmer’s announcement confirming that Chancellor Rachel Reeves would remain in office for the foreseeable future. This eased fears of changes to economic policy and reduced concerns about increased fiscal stimulus through further borrowing.

The market continues to factor in expectations of monetary policy easing, with the possibility of a Bank of England rate cut as early as August.

BoE Governor Andrew Bailey stated it was too early to assess the inflationary impact of trade tariffs but confirmed that interest rates are moving downwards. Meanwhile, MPC member Alan Taylor called for faster rate cuts, warning of the risk of a hard landing for the UK economy.

Technical analysis of GBP/USD

On the H4 chart, GBP/USD completed a decline to 1.3562, followed by a growth link to 1.3675. Today, another downward move to 1.3528 is possible, followed by growth back to 1.3675. The market is likely to continue forming a broad consolidation range around 1.3675. A breakout upwards would open the way for the trend to continue towards 1.4000, while a breakdown below would signal continuation of the downward wave to 1.3485. The MACD indicator confirms this scenario, with its signal line below zero and pointing firmly downwards, indicating that the bearish momentum remains.

On the H1 chart, GBP/USD completed a correction to 1.3565 and a growth wave to 1.3675, marking the boundaries of the consolidation range around this level. An upward breakout would suggest a move to 1.3788, while a downward breakout would open potential for a decline to 1.3485. The Stochastic oscillator confirms this setup, with its signal line below 80 and pointing sharply downwards towards 20, indicating building downward pressure.

Conclusion

GBP/USD is correcting after its recent rally, with near-term support at 1.3528-1.3485 and resistance at 1.3675-1.3788. Market sentiment remains driven by the strength of the US dollar, BoE policy expectations, and evolving UK fiscal outlooks, with technical indicators pointing to potential further downside in the short term.

Eurozone PPI fell -0.6% mom in May, in line with market expectations, as falling energy costs drove the decline. On an annual basis, PPI decelerated from 0.7% to 0.3% yoy. Energy prices dropped -2.1% mom on the month, while prices for intermediate goods slipped -0.1% mom. In contrast, prices for durable and non-durable consumer goods rose 0.3% mom and 0.2% respectively mom. Excluding energy, producer prices still edged up 0.1% mom.

Across the EU as a whole, PPI also fell -0.6% mom and eased to 0.4% yoy. Among member states, Bulgaria saw the sharpest monthly drop at -3.7%, followed by Greece (-1.9%) and Finland (-1.8%). A handful of countries including Cyprus (+1.0%) and Latvia (+0.1%) registered modest price gains.

Full Eurozone PPI release here.

• USD/CAD fails to rebound despite stronger US nonfarm payrolls.
• Bearish trend likely to continue; next support near 1.3455.

USD/CAD could not successfully capitalize on stronger-than-expected US nonfarm payrolls, ultimately closing marginally lower on Thursday. The passage of Trump’s megabill in the Republican-controlled House of Representatives – expected to increase fiscal debt by more than $3 trillion – came as no surprise to investors and kept volatility subdued as US investors logged off for the July 4 celebrations.

However, concerns over global trade partners beginning tariff payments on August 1 continued to weigh on market sentiment early on Friday, reinforcing the bearish short-term outlook.

Technical indicators are clearly pointing downwards, flagging a potential downtrend extension below June’s low of 1.3538. In this scenario, the tentative support line from July 2023 could come to the rescue near 1.3455. If this level fails to hold, the decline may accelerate toward the 1.3355 support zone, which was last tested in January–February 2024. A further drop could target the 1.3230–1.3275 area.

On the upside, the bulls may encounter immediate resistance between the 20-day simple exponential average (EMA) at 1.3660 and the psychological 1.3700 level. Further up, the 50-day EMA and the 1.3800 mark, which may limit upward momentum and prevent a swift recovery toward 1.3915.

In summary, the current bearish phase in USD/CAD appears to have more room to run, with a new lower low potentially forming around 1.3460.

Today, financial markets in the United States are closed in observance of Independence Day. Investor sentiment was likely buoyed by the latest rally in the S&P 500 index (US SPX 500 mini on FXOpen), which set a new all-time high yesterday, surpassing 6,280.

The bullish momentum has been driven by robust labour market data in the US. According to ForexFactory, analysts had anticipated a rise in the unemployment rate from 4.2% to 4.3%, but instead, it unexpectedly declined to 4.1%.

Can the stock market continue to climb?

Technical Analysis of the S&P 500 Chart

Analysing the 4-hour chart of the S&P 500 index (US SPX 500 mini on FXOpen)on 30 June, we observed the following:

→ An ascending channel was formed (indicated in blue);

→ A developing bullish impulse (marked with an orange line) suggested the price would move towards the upper boundary of the channel – a scenario that materialised with yesterday’s rally (as shown by arrow 1).

However, from a price action perspective, the recent downward move (arrow 2) has now gained significance. It may indicate that sellers are becoming more active around the identified resistance level.

Should the price decline towards the lower orange line, this could negate the current bullish impulse altogether, effectively reflecting a classic bearish engulfing pattern.

Given the above, there is reason to believe that bears are attempting to regain control after the S&P 500 (US SPX 500 mini on FXOpen) surged over 5% in the past 10 days. As such, a potential breakout below the orange line cannot be ruled out, with price action possibly targeting the median of the blue ascending channel.
What happens next?

The market’s trajectory will largely hinge on developments related to tariffs. Trade policy will remain in the spotlight next week, as key deadlines set by the White House approach — events that traders will be closely monitoring.

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ECB President Christine Lagarde said Euro can only rival the US Dollar’s dominance in global finance if European Union leaders commit to improving productivity and internal efficiency. In an interview with German broadcaster ARD, Lagarde called on EU policymakers to reduce trade barriers within the bloc and simplify regulatory frameworks.

“Political leaders need to engage to make our economy more productive and more efficient,” she said, adding that such steps are essential for Euro to become the world’s leading currency.

Lagarde also reiterated that interest rates in the Eurozone are now “in a good place” following June’s deposit rate cut to 2.00%. She emphasized ECB's full commitment to its 2% inflation target.

Daily Pivots: (S1) 196.40; (P) 197.25; (R1) 198.75; More...

GBP/JPY is staying in consolidations below 198.78 and intraday bias remains neutral at this point. Another dip might be seen but outlook will stay bullish as long as 193.99 support holds. Above 198.78 will resume the rise from 184.35 to 199.79 resistance. Break there will target 100% projection of 180.00 to 199.79 from 184.35 at 204.14.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 175.94 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 169.60; (P) 170.10; (R1) 170.90; More...

EUR/JPY's rally resumed after brief consolidations and met 100% projection of 154.77 to 164.16 from 161.06 at 170.45 already. Intraday bias is back on the upside. Sustained trading above 170.45 will extend the rise from 154.77 to 138.2% projection at 174.03. On the downside, however, break of 168.44 support will indicate short term topping, and turn bias to the downside for deeper pullback.

In the bigger picture, price actions from 175.41 are seen as correction to up trend from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 0.8591; (P) 0.8624; (R1) 0.8642; More...

Intraday bias in EUR/GBP is turned neutral with current retreat, and some consolidations could be seen below 0.8668 temporary top. Further rally is expected as long as 0.8506 support holds. Above 0.8668 will resume the rally from 0.8354 to retest 0.8737 high. Decisive break there will resume the whole rise from 0.8221 low.

In the bigger picture, the structure from 0.8221 medium term bottom are not impulsive enough to suggest that it's reversing the downside from 0.9267 (2022 high). But even if it's a correction, firm break of 0.8737 will still pave the way to 61.8% retracement of 0.9267 to 0.8221 at 0.8867.