FX Weekly: Solid payrolls provides only limited relief for the dollar

The US dollar has stabilised to a degree this week after another solid non-farm payrolls report generated a bit of a rebound in US interest rate expectations. The bigger picture remains that the dollar is under pressure on account of both the perception that the FOMC will resume easing policy soon and the wider discomfort among investors with the Trump administration’s policy approach. Next week is light on the economic data front, while the US fiscal package has finally been passed, leaving the 9th July deadline for the “pause” on Trump’s reciprocal tariffs. We think the most likely outcome – and the one that market participants appear to anticipate – is another extension. But there is clearly some risk that the president decides to kick that particular hornet’s nest again, with potentially adverse effects for the greenback.