Key points

• US ISM service sector PMI and employment report will affect the trend of Federal Reserve interest rates.
• French and British elections will be in focus.
• The China Private Sector Purchasing Managers Index will affect market risk sentiment.

US Dollars

On Monday (July 1st), the June ISM Manufacturing Purchasing Managers Index (PMI) data in the United States will attract investor attention. If the data growth exceeds expectations, it may boost hopes for a soft landing in the economy. However, as manufacturing only accounts for 30% of the US economy, these data are unlikely to change the Federal Reserve's interest rate path.

On Tuesday (July 2nd), the job vacancy report for JOLTs will have a greater impact on the Federal Reserve's interest rate path. The further decline in job vacancies and turnover rates may indicate a deterioration of the labor market environment. As job vacancies decrease and the labor market weakens, the likelihood of workers resigning also decreases accordingly.

Wednesday (July 3rd) may become a key trading day for the US dollar. The ADP non farm employment changes and unemployment benefit application data will guide investors to understand the labor market situation.

If there is a significant increase in non farm employment and further decline in unemployment claims, it may reduce investors' expectations for the Fed's interest rate cut in September. However, the ISM Service Purchasing Managers Index is also worth investors' attention. The service industry accounts for over 70% of the US economy and drives overall inflation.

After the holiday on Thursday (July 4th), market attention will shift to the June US employment report. Higher than expected salary growth, stable US unemployment rate, and significant increase in non farm employment may lower investors' expectations for the Fed's interest rate cut in September.

The tightening of labor market conditions will support wage growth and increase disposable income. The increase in disposable income may stimulate consumer spending and drive demand driven inflation.

Investors should also pay attention to the minutes of this week's Federal Reserve Open Market Committee meeting (Wednesday) and the speeches of the Federal Reserve spokesperson. The perception of inflation and the timing of interest rate cuts may affect market trends.

Euro

On Monday, the final data of the Eurozone Manufacturing Purchasing Managers Index and German inflation data will be released, which may have an impact on the EUR/USD exchange rate. Unless there is a change in the Purchasing Managers Index for the manufacturing industry, the German inflation data may affect expectations for a rate cut by the European Central Bank in the third quarter of 2024.

On Tuesday, preliminary inflation data for the Eurozone will also attract investor attention. An unexpected increase in inflationary pressure may dampen expectations for the European Central Bank to cut interest rates in the third quarter of 2024.

On Wednesday, the final data of the Eurozone Service Purchasing Managers Index also needs to be taken seriously by investors. The revised data may draw attention from the European Central Bank. The service industry accounts for over 60% of the Eurozone economy and remains the root cause of the European Central Bank's inflation problem.

Thursday and Friday (July 5th) will focus on the German economy. Factory orders and industrial output will become the focus of attention. If the data falls below expectations, it may support investors' hopes for a rate cut by the European Central Bank in the third quarter of 2024.

In addition to economic data, the results of the French general election on Sunday (July 7th) and sentiment towards the election will affect buyer demand for EUR/USD. However, investors should also pay attention to the comments of the European Central Bank and consider the minutes of the ECB's monetary policy meeting (Thursday).

Pound Sterling

On Monday, the final UK Manufacturing Purchasing Managers Index data will attract market attention to the pound. The upward adjustment of PMI data may indicate a strong UK economy. However, as manufacturing accounts for less than 30% of the UK economy, these data are unlikely to change the Bank of England's interest rate plan.

On Wednesday, the revision of the final UK Service Industry Purchasing Managers Index data may affect expectations for the Bank of England to raise interest rates. Because the service industry accounts for over 70% of the UK economy and has a significant impact on inflation.

Other statistics for this week include housing price data.

In addition to the data, the UK general election was also the main event affecting the pound market this week. Investors should also consider comments from the Bank of England and the Bank of England credit status survey (Thursday).

Canadian Dollar

On Wednesday, Canadian trade data will affect demand for the Canadian dollar. Improving trade conditions may indicate a warming demand environment. In addition to trade surplus, investors should also consider import and export trends.

However, employment data may have a greater impact on buyer interest in the Canadian dollar. The weak labor market conditions may drive investor expectations for a rate cut by the Bank of Canada.

AUD

On Monday, job advertisements and final manufacturing PMI data in Australia may affect buyer demand for the Australian dollar. The significant decrease in the number of job advertisements may indicate a weak labor market in Australia.

On Tuesday, the minutes of the Federal Reserve of Australia meeting will be released. In June, the Reserve Bank of Australia's interest rate statement and Reserve Governor Michele Bullock emphasized the board's discussion on interest rate hikes. After the policy decision, the unexpected inflation data intensified investors' expectations for the Australian Federal Reserve's interest rate hike in 2024. The meeting minutes may reveal the necessary conditions for raising interest rates.

Thursday's trade data will also attract investor attention. Australia's trade to GDP ratio exceeds 50%. The deterioration of trade conditions may affect the Australian economy and labor market, with 20% of the workforce engaged in trade-related work. The improvement in trade conditions may exacerbate investors' expectations for the Australian Federal Reserve's interest rate hike.

New Zealand Dollar

On Tuesday, New Zealand's second quarter business confidence data will focus on the NZD/USD exchange rate.

The rebound in business confidence may alleviate investors' expectations for a rate cut by the Federal Reserve of New Zealand. The upward trend of business confidence may indicate a recovery in economic activity and the job market. The improvement of the labor market may support wage growth and increase disposable income.

Japanese Yen

Yen stillin the intervention range. Therefore, there may be significant fluctuations this week.

On Monday, Japan's final manufacturing PMI and consumer confidence data are worth paying attention to. Unless there is a change in PMI, consumer confidence may have a greater impact on the USD/JPY exchange rate. The increase in consumer confidence may indicate more consumer spending and increased inflationary pressure.

On Wednesday, the report based on the Tankan survey also needs to be followed together with the final service industry PMI. As investors consider a possible interest rate hike by the Bank of Japan in July, revisions to the non manufacturing Tankan index and service sector PMI will be of interest. The growth of service industry activity may drive expectations for policy adjustments by the Bank of Japan in July.

The household expenditure data to be released on Friday will be an important data. The increase in household spending may drive demand driven inflation and prompt the Bank of Japan to tighten monetary policy to support the yen. However, weak data may have a negative impact on the Japanese yen. Private consumption contributes over 50% to the Japanese economy. The further decline in household spending may indicate a contraction in the economy in the second quarter.

In addition to data, investors should also pay attention to potential signs of intervention to support the yen. The comments from the Bank of Japan also need to be considered.

China

On Monday, the Caixin Manufacturing Purchasing Managers Index (PMI) will affect the demand for risky assets.

On Wednesday, the Caixin Service Industry Purchasing Managers Index also had an impact. The service industry accounts for over 50% of China's economy. The weak demand here may affect the Australian, New Zealand, and Canadian dollars.

In addition to economic data, investors should also pay attention to the progress of the China Europe trade negotiations.