United States Jobs Data in Focus After Key Inflation Print.

The foreign exchange market begins the final week of the quarter digesting last Friday’s key US inflation report, which came in slightly hotter than anticipated. The data reinforced the Federal Reserve's cautious "higher for longer" stance on interest rates and provided a firm underpinning for the US Dollar. As the first half of the year draws to a close, market focus will be dominated by critical labour market data from the US, while also keeping an eye on political developments in Europe and month-end portfolio adjustments, which can influence currency flows.

The Pound Sterling continues to trade in the shadow of last week’s dovish hold from the Bank of England. With the central bank signalling its proximity to an initial rate cut, the Pound remains sensitive to data that could influence the timing of that move. The UK economic calendar is light this week, so Sterling's direction will likely be dictated by broader market themes, particularly the performance of the US Dollar and any shifts in overall risk sentiment.

The US Dollar starts the week on solid ground, supported by inflation data that gives the Federal Reserve little reason to rush into cutting interest rates. After last week's Core PCE report, the focus now pivots squarely to the health of the US labour market. An early release of the influential Non-Farm Payrolls report on Thursday, due to a US market holiday on Friday, will be the week's main event, providing a crucial test for the Dollar's recent strength.

The Euro remains exposed to both the strong US Dollar and ongoing political uncertainty ahead of the first round of the French legislative election this weekend. Last week's mixed economic data from the region did little to shift the narrative of a widening policy divergence between the patient Federal Reserve and the European Central Bank, which has already begun its easing cycle. Inflation data from key Eurozone countries this week will be watched closely.

Events to Watch This Week:

• Monday, June 30:

  • German Preliminary CPI (Inflation for June)

• Tuesday, July 1:

  • Canadian GDP (May)

  • US ISM Manufacturing PMI (June)

• Wednesday, July 2:

  • Eurozone Unemployment Rate (May)

  • US Factory Orders (May)

• Thursday, July 3:

  • US Non-Farm Payrolls Report (for June)

• Friday, July 4:

  • Note: US Markets Closed for Independence Day Holiday

The week is defined by the crucial US employment data, brought forward to Thursday due to the US holiday. A strong jobs report could solidify the US Dollar's recent gains and reinforce the Fed's patient stance, while any unexpected weakness could reignite debate about the timing of a potential rate cut. Expect market activity to build towards this key release.

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