• US tries to talk Iran out of Hormuz tolls as talks resume in Doha
• Fed Chair Warsh pledges independence while fighting inflation
• ECB’s Lagarde says inflation, growth risks now more broadly balanced
• US payrolls seen expanding at a slower pace as wage growth stays benign

FX: USD rose but closed off its high at 101.43. New Fed Chair Warsh spoke at the ECB forum at Sintra, but price action was largely modest with the overall tone proving less hawkish than his debut FOMC press conference. ISM manufacturing missed expectations but saw a welcome drop in the prices component while ADP printed just shy of estimates. Eyes now turn to today’s NFP report which Treasury Secretary Bessent said he expects a strong jobs number, though clarified that he had not seen the report.

EUR tried to cling to 1.14 as prices were volatile in the world’s most popular currency pair. Focus has been on the ECB Sintra forum with remarks generally balanced, and with policymakers stressing data dependency heading into the July/September meetings. On the inflation front, today’s release saw the headline cool to 2.8%, below the expected 3% and the prior 3.2%. Core fell from 2.6% to 2.4% and the services figure also edged lower to 3.2%, previously at 3.5%. Some very mild pressure was seen in the single currency and plays in favour of a hold in July as the ECB can take some time to see how things play out.

GBP closed marginally higher on the day after it popped up to a 13-day high at 1.32932 but retraced some of those gains. BoE Governor Bailey spoke at the ECB forum and noted that the softening economy and job market were the reason not to lift rates.

JPY hit a fresh high at 162.83 before closing lower on the day. There was more inevitable jawboning from a 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. Holiday thinned conditions are favourable for intervention though the NFP report needs to be navigated today.

US stocks: The S&P 500 lost 0.22% to close at 7,483, the Nasdaq closed down 1.54% at 29,809 and the Dow Jones settled lower by 0.03% at 52,310. The tech-laden Nasdaq was the clear laggard amid broad-based big weakness in semiconductor names, although the Mag 7 names notably firmed. Meta (+8.8%) was the notable outperformer, buoyed by a Bloomberg report that the firm plans to build a cloud business to sell excess AI compute capacity. That meant Communications sat atop the sectoral breakdown, with Technology Utilities and Industrials at the bottom. Nike moved 4.9% higher as it beat on revenue but gave cautious guidance amid a slow turnaround. Microsoft rose 3% as it plans to announce fresh job cuts which are likely to be less than 2.5% of its workforce.

Asian Stocks: Futures are mixed. APAC stocks were mixed amid a slew of regional data and tech led gains Stateside. The ASX 200 moved lower on softness in financials and tech. The Nikkei 225 rallied after a strong Tankan but then retraced as the data supported more policy normalisation by the BoJ. The Shanghai Comp was underpinned PMI data.

Gold got close to the new cycle low at $3,942 from Tuesday, before bugs stepped in as the dollar and yields pulled back from one-week highs.

Day Ahead – US Non-Farm Payrolls

The monthly US employment report gets released today due to the 4 July Independence Day holiday. The forecast headline is for another decent gain in jobs of 110,000, which would be the fourth straight print above 100k.  The three-month average is a whopping 188k, but the long-term six-month average is 92k and the 12-month average now at 42k. We note that the headline averaged merely 8.5k per month between January 2025 and February 2026. Put this another way, total job gains in the first five months of 2026 are 569k, almost five times the total additions in 2025. The unemployment rate is predicted to remain unchanged at 4.3%, in line with the FOMC’s latest projection in June for the jobless rate to remain there at the end of the year. Average hourly earnings are seen rising by 0.3% m/m in June, matching the prior rate, with the annual reading one-tenth higher at 3.5%.

Money markets currently predict roughly a chunky 45bps of Fed tightening by the second quarter of next year, and there is still a risk that the tightening is expected earlier. There’s around 22bps of rate hikes is priced for the September FOMC meeting and 8bps or around a one in three chance of a move at the next meeting on 29 July. A strong report, with strong World Cup hiring, sets up the July meeting going beyond a coin toss chance of a rate hike, while any labour market weakness will ease elevated rate rise expectations as the markets breathe a sigh of relief, though focus will quickly turn to the Fed’s primary objective around price pressures.

Chart of the Day – Meta jumps on ‘Compute’ plan

The Mark Zuckerberg firm, and owner of Facebook and Instagram surged yesterday as Bloomberg reported that Meta is building a cloud business to sell excess AI computing capacity. Its aim is to monetise its already multi-billion investment in AI infrastructure. This move could also reduce Meta’s reliance on advertising revenue and allow it to rival cloud giants like Amazon’s AWS, Microsoft’s Azure and Alphabet’ Cloud platforms. Return on investment (ROI) ie its path to profitability, is key for Meta as its huge capex plans erode free cash flow. Technically, the jump takes prices through the minor Fib level of the record high to 2026 low at $585.21. The 100-day SMA sits at $618.41 with the 50-day just below and the major Fib (38.2%) at $625.39. Above here lies the 200-day SMA at $647.42.