Strong US Jobs Data Boosts Dollar, Dims July Rate Cut Hopes

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3490-1.3730

Euro                 1.5890-1.6240

Sterling            1.8430-1.8690

WTI Oil (opening level) $70.25

The CAD/USD is opening at 1.3601 ( 0.7352 )

USD strengthened following unexpectedly strong US jobs data, this is a sign traders see less pressure on the Federal Reserve to cut interest rates. The USD Index touched a 97.40 high only to drift lower after the House passed Trump's significant tax cut and spending bill, and after he ratcheted up trade tensions again ahead of next week's deadline for higher tariffs.

Headlines

·    US NonFarm Payrolls increased by 147,000 in June, surpassing the forecast of 111,000, as state and healthcare job gains offset federal cuts. The unemployment rate decreased to 4.1%, and wage growth slowed to 0.2%, alleviating inflation worries. Despite solid headline figures, the report masked weakness in private payrolls and other potential warning signs of deterioration in the labour market, but still a report that all but removed hopes for a July rate cut.

·    Trump's tax-cut legislation passed its final hurdle in Congress on Thursday, with the Republican-controlled House narrowly approving a large package to fund his domestic agenda, potentially leaving millions of Americans without health insurance.

·    ISM Services PMI increased to 50.8 in June 2025 from 49.9 in May, slightly exceeding the forecast of 50.5. This indicates a rise in economic activity in the services sector after a month of contraction, despite firms frequently citing slow growth and economic uncertainty.

·    The US trade gap expanded to $71.5 billion in May 2025 from $60.3 billion in April. Exports dropped 4% to $279 billion from April's record $290.5 billion, with significant declines in nonmonetary gold, natural gas, and finished metal shapes.

·    Prime Minister Keir Starmer and Chancellor Rachel Reeves reassured markets by pledging fiscal discipline and economic stability, which lifted bonds and the pound, enhancing confidence in UK assets

Key Points

·    Equities: US/Europe up; strong jobs; tech/semis lead; UK rebounds

·    Volatility: VIX at 4-month low; calm but event risk ahead

·    Digital assets: Bitcoin stable; IBIT steady inflow; ETHA up; mining splits

·    Fixed Income: US short-end yields rise on reduced rate cut hopes

·    Currencies: Dollar heading for a small weekly loss

·    Commodities: Gold recovers from NFP drop, crude focus on OPEC+ meeting