[MARKET ANALYSIS] DXY gains slightly into ADP Employment Change and Fed Chair Warsh; USD/JPY reacts to more jawboning

Snapshot: G10s are mostly lower against the USD this morning, with clear underperformance in the Aussie, whilst the Kiwi fares a little better vs peers. USD/JPY continues to hold at elevated levels beyond the 162.50 mark, with further jawboning attempts seen overnight.
DXY is firmer this morning and trades at the upper end of a 101.21-101.39 range (WTD peak at 101.43). The strength which comes amidst the markets’ continued hawkish shift at the Fed, seen following the last FOMC meeting. Markets also appear to be positioning for a hawkish commentary from Chair Warsh today, and then the NFP report on Thursday. On that note, Treasury Sec Bessent said he expects a strong jobs number, though clarified that he had not seen the report.
There are some key data releases today. US ADP employment change for June is expected to print 113K (prev. 122K); Challenger job cuts for June are seen at 85K (prev. 97.006K). Revelio Public Labour Statistics are also due. ISM Manufacturing PMI for June is also set to be released.
EUR and GBP have both been weighed on by the USD strength. The single currency has had a number of ECB members to digest, who are currently hosting the Sintra conference. Broadly speaking the remarks have been balanced, and with policymakers stressing data dependency heading into the July/September meetings. Today will see the release of the EZ CPI figures for June, where the headline Y/Y figure is expected to cool to 3% (prev. 3.2%); the core is also expected to dip a little from last month’s report. On the activity side of things, today’s Manufacturing PMI finals were subject to mild upward revisions, and the accompanying commentary was upbeat. The German report highlighted that “we saw the rate of input cost inflation retreat from May’s near four-year high as the drop in oil prices started to filter through”.
JPY continues to remain in focus, with another jawboning attempt proving impotent. The latest attempt was by Top FX Diplomat who stated that Japan is in touch with US counterparts more than most imagine and that a US official made supportive remarks about FX action. This spurred some very mild pressure in the pair (05:30 BST / 00:30 EDT), falling from 162.79 to 162.56, before retracing about half of that move. A breach beyond the 163.00 mark could be difficult, given expectations that Japan may use the low-volume / holiday-thinned conditions on Friday (US Independence Day) to deliver effective intervention. Nonetheless, a hawkish Warsh and a strong NFP report on Thursday pose risk to the 163.00 level, which some have touted as the new “line in the sand”.