US FX WRAP: Dollar weighed by lower short-end US yields; CAD outperforms

USD was once again weighed by a pullback in short-end US yields. The move came amid a slight decline in prices of crude and refined products in response to optimism about an imminent announcement of the Iran-Oman deal, which is expected to kickstart the path back to the reopening of the Strait of Hormuz. Earlier today, US President Trump said they will know regarding Iran in the next 48 hours. Separately, US data showed an ISM Services PMI miss, albeit still in expansion, while employment moved back into contraction and prices remained elevated. Ahead of NFP on Friday, the July ADP figure eased to 44k from June's 98k (exp. 70k), with Pantheon Macroeconomics in response noting it suggests that the risks to the July private payrolls figure are skewed to the downside. At the Fed, Schmid (2028 voter) remains a hawk, describing current policy as not restrictive enough to get inflation back to 2%; meanwhile, Kashkari (2026 voter) continues to advocate for slowly hiking rates. 

NZD underperformed amid the unemployment rate unexpectedly moving higher to 5.6% in Q2 (exp. 5.4%, prev. 5.3%) despite better-than-expected employment growth, 0.5% Q/Q (exp. 0.1%, prev. 0.2%). NZD/USD hit lows of 0.58598 before paring most losses to around 0.58870.

CAD, CHF, and AUD outperformed vs USD with currency-specific newsflow light. EUR/USD is modestly firmer, showing no reaction to EZ PMIs, which did not deviate enough from prelim figures to spark a reaction. EUR/USD briefly breached above the August high of 1.5590 to 1.5594 before trimming to around 1.1548.