The USD surged to levels last seen on July 5th yesterday amid month-end flows but subsequently lost momentum, closing with a marginal gain. Yesterday's JOLTS report exceeded expectations, with the previous month's data revised upward. The USD declined by as much as 0.4% overnight before the North American open, with the JPY leading G10 gains following the BOJ's policy rate hike. At the post-meeting press conference, Governor Ueda indicated that a further rate hike before year-end would depend on data, and the BOJ could increase rates beyond 0.5% if necessary, citing the weak yen as a risk to rising inflation. The BOJ also announced plans to reduce Japanese government bond purchases by roughly half by Q1 2026.

Today's ADP employment change report missed estimates, adding the fewest workers since January. The Q2 employment cost index of 0.9% was below forecast after surging in Q1. Wages for job-changers grew at the slowest pace since 2021, consistent with signs of a cooling labor market.

Markets anticipate the Fed to maintain rates at its decision today, with investors seeking clues about the potential start of the rate cut cycle in September. Careful analysis of the Fed's statement and press conference regarding inflation, growth, and labor market data will be crucial for determining the likelihood of policy easing. Implied swap odds fully price in a cut for September and nearly fully price in another by December. Amazon and Apple report earnings later today.

EUR/USD closed slightly lower yesterday and is up 0.3% today, trading about 0.15% lower than a week ago. Yesterday's first estimate of Q2 GDP slightly exceeded expectations (0.3% q/q vs 0.2% expected), but a surprise contraction in German GDP and mixed CPI results weighed on the euro. This morning's Eurozone aggregate CPI data showed unexpected acceleration in both headline and core inflation, although services prices declined from the previous month, offering some relief for the ECB.

GBP/USD fell 0.2% yesterday and is slightly higher today, trading roughly 0.6% lower than a week ago. Investors eagerly await tomorrow's BOE rate decision, with swap odds indicating a roughly equal chance of a rate cut.

USD/CAD closed marginally lower yesterday and has dropped 0.3% this morning after Canada's strong May GDP data. The pair is trading about 0.15% higher than a week ago. The implied 2.2% annualized pace for Q2 GDP exceeds the BOC's forecast of 1.5% growth. Preliminary data suggesting a June growth rate of just 0.1% hints at a weak Q2 end after stronger April and May results. Retail and wholesale trade declined in May, indicating weakness in household spending. Implied swap odds of a September BOE rate cut slightly decreased after the report, remaining just below 90%.