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* USD breaks nine-day losing streak ahead of critical NFP

* Stocks make more fresh all-time highs as ADP employment craters

* US and Vietnam reach initial tariff deal, deadline 9 July for rest

* Tesla deliveries fall for a second quarter in a row, stock up 4.97%

FX: USD broke its long losing streak though the ADP jobs data was woeful, heavily missing expectations of 95k with a negative 33k print. As we pointed out yesterday, there is little correlation between this and NFP figures and Fed rate cut expectations barely moved by the end of the day. Trump announced a trade deal with Vietnam, while Fox reported that an India agreement could come today. See below for more on the Dollar Index chart.

EUR fell back from its recent high at 1.1829, though it rebounded off a long-term Fib level at 1.1749. Comments from ECB officials have been relatively neutral after De Guindos’ notable remark that 1.20 is ‘acceptable’ in EUR/USD, but above that would be ‘more complicated’. A move near there looks possible with a very poor NFP, but prices are overbought on several indicators.

GBP sold off sharply as GBP underperformed massively. Cable fell below 1.36 having hit a multi-year high at 1.3788 intraday on Tuesday, before paring losses after the US open. The decline was triggered by fresh political uncertainty as the government was forced to scale back welfare reform plans on a rising rebellion in its own party. Speculation over the future of the Treasury Chief increased as PM Starmer refused to guarantee Chancellor Reeves would remain in her post. Gilt yields jumped with the biggest single rise in the 10-year since October 2022. Separately, BoE’s Taylor said the UK neutral real rate is to be around 0.75-1.0%, putting the nominal rate around 2.75-3.0%

USD/JPY ticked higher as trade uncertainty clouded the yen outlook after President Trump talked about 30% or even 35% tariffs, above the current 24%. Relative central bank policy is also currently weighing as patience on rate hikes was the message from BoJ officials at the ECB forum. Markets currently price in around 15bps of hikes by year end.

AUD dipped initially, though bounced off the resistance/support level at 0.6549 and settled marginally higher on the day. Disappointing domestic data didn’t help the aussie. CAD eventually rose on the day with the major dropping to a two-week low,  as trade uncertainty remains a drag.

US stocks: The S&P 500 printed up 0.47% at 6,227, a record close. The Nasdaq closed up 0.73% at 22,642. The Dow Jones finished lower at 44,484, losing 0.02%. Energy and Materials bounced and outperformed, with tech not far behind, while Health, Utilities and Financials underperformed in the red. Tesla surged 5% as it reported that Q2 deliveries fell short of Bloomberg expectations. However, a lot of Tesla watchers and sell-side forecasts saw Q2 delivery numbers around 355-360k, so they notably topped those. Apple rose for a fourth straight day, having found support at its 50-daySMA at $203.44. A major broker upgraded the stock, citing potential Q3 revenue and EPS growth of 8% and 10% respectively. Netflix sold off for a second day in a row after posting a record top at $1,341. This came after its new series of Squid Game hit record viewing figures.

Asian stocks: Futures are mixed. APAC equities were also mixed after a similar performance on Wall Street on competing and numerous market drivers. The ASX200 upside was constrained by disappointing retail sales data. Mining and minerals strength was offset by tech and financials losses. The Nikkei 225 retraced further from Monday’s fresh highs amid trade deal uncertainty. The Shanghai Comp and Hang Seng were mixed with the latter boosted by gaming stocks jumping after a surge in Macau June revenue.

Gold enjoyed a third day of buying but in a very narrow range day. Markets are focused on the NFP data and Fed rate cut bets on the July FOMC meeting. There is just above a one in five chance of a 25bps reduction on 30 July.  

Day Ahead – US Non-Farm Payrolls

The US economy is expected to add 110k nonfarm payrolls in June, below the May print of 139k. However, 95k of May’s gain was netted out by revisions to the prior two months, leaving a net change of just 44k. So, watch revisions again which have consistently been lower in recent months. The three-month headline average is 135k, the 6-month average is 157k, and the 12-month average is 144k.

The unemployment rate is expected to tick one-tenth higher to 4.3%. That would be primarily due to a drop in the labour force participation rate, which fell to the equal-lowest level in three years in May. The Fed’s most recent projection in June forecast a 4.5% level by the end of this year. The rate of average hourly earnings is expected to cool to +0.3% m/m from +0.4% in May, while average workweek hours are seen unchanged at 34.3hrs.

Chart of the Day – Dollar Index hits long-term support

The NFP is all about whether July rate cut odds are strengthened with a disappointing set of data. Fed Chair Powell recently said the labour market remains solid; the economy is in good shape and the Fed is very much data dependent. A weak payrolls report would probably be blamed on the uncertainty President Trump’s administration’s policies are causing. But it’s very likely the Fed will require more evidence than one month’s payrolls report and lots more evidence on the inflation readings to alter their current ‘wait-and-see’ stance.

Risks are skewed to a bigger move to the downside in the dollar if we get a weak report, as markets will simply await more evidence on any knee-jerk move higher from more solid data. That said, the roughly 20% chance of July 25bps rate cut could get priced out in that instance as shorts take profits. Major long-term resistance sits at 99.57 on the Dollar Index with the 50-day SMA just below at 99.16 and the mid-June trough at 97.60. There is a long-term support trendline from a low in 2011 around 96.47.