Following last week’s robust U.S. employment data and with markets anticipating a strong Consumer Price Index report, U.S. interest rates have ticked higher, helping the dollar start the week with renewed strength. Though tariff letters from the White House were expected before the weekend, deliveries may now begin today. The original July 9 deadline for reciprocal tariffs has seemingly shifted to August 1. The U.S. has reached tariff-related agreements with the UK, Vietnam, and partially with China, while similar deals may soon be completed with other Asian nations. The U.S. dollar is broadly stronger, outperforming nearly all G10 and emerging market currencies, with the Swedish krona being a rare exception due to stronger-than-anticipated inflation data.

Asia Pacific Markets

In Asia Pacific, the Japanese yen declined as the dollar climbed to a five-day high following a jump in U.S. Treasury yields. The dollar extended its gains to nearly JPY145.50, with further appreciation possible if support around JPY143.50 holds. Japan reported a surge in household spending but weaker wage growth, with inflation-adjusted earnings falling sharply.
Meanwhile, in Australia, the local dollar faced intense selling as it approached the $0.6600 level. It dropped past $0.6535, nearing key technical support. Market attention is on the Reserve Bank of Australia’s upcoming policy decision, where a quarter-point rate cut to 3.60% is widely expected. Futures markets suggest further easing by year-end, reflecting a cooling labor market and slowing economic activity.

European Markets

In Europe, the euro is retreating from last week’s multiyear high near $1.1830, dipping below $1.1720 following U.S. job figures. A move beneath $1.1685 could mark a deeper correction, driven by widening rate differentials with the U.S. While the eurozone's composite PMI improved in June, retail sales for May declined by 0.7%, nearly reversing gains from earlier in the year. German data showed mixed signals, with disappointing factory orders but a rebound in industrial output.
The British pound also fell after reaching its highest point since 2021 at $1.3790. Political uncertainty caused it to slide below $1.3565. Sterling is now trading near weekly lows, with markets eyeing the UK’s May GDP report, which is expected to show a sharp slowdown in Q2 growth.

American Markets

The U.S. Dollar Index traded in a narrow band before breaking above 97.40 on upbeat employment news but failed to hold that momentum. Now testing resistance near 97.55, a decisive move could target 97.90—where the 20-day moving average lies. The dollar has not closed above this average since mid-May. With limited economic data this week, investor focus shifts to tariff announcements and inflation data. Hopes for a rate hike in July have diminished, but a firm CPI reading next week may cast doubt on a potential rate cut in September. U.S. Treasury yields have risen, with the 10-year note nearing 4.36% and potentially reaching 4.50%. The two-year yield also climbed, and may revisit the 4.0% level if momentum continues.