Forex today: 4th July holidays made for quiet session, but EZ data should be concerning

Forex overnight was somewhat subdued given the 4th July holidays in the U.S. with light calendars elsewhere. However, the eurozone reported a poor services sector number that should make next week's IP data one to watch considering the easing bias over at the European Central Bank. Meanwhile, ECB comments were dovish again but Eurozone bonds were mixed and the DAX nudged higher, following in the footsteps of yesterday's record closes in US benchmarks. 

Eurozone May retail sales were a miss, opening up the case for the ECB to act coming in at -0.3%m/m vs the estimated +0.3%m/m but prior revised to -0.1%m/m from -0.4%m/m. This shows a slowing quarter for the services sector which is falling in line with a poor industrial backdrop. 

As for US yields, the 10-year treasury futures’ yields remained below the 2.00% mark at 1.94% which is the lowest since 2016 as markets expect the Federal Reserve to cut by at least 25 basis points at the July meeting, while there is actually 32bp worth of easing ready priced in.

As for currencies related to the session ahead, analysts at Westpac explained that AUD/USD consolidated around 0.7025, the EUR/USD ranged sideways between 1.1270 and 1.1295 following  ECB’s Rehn saying, “We should no longer see the recent slowdown in growth as a brief temporary dip in the economy, as a ‘soft patch.’” 

"USD/JPY ranged sideways between 107.70 and 107.90 and GBP/USD held around 1.2580.  NZD slipped a little further before steadying around 0.6690, pushing AUD/NZD up 25 pips on the day, to 1.0500."

Key events ahead:

Non-Farm Payrolls Preview: Three scenarios for the EUR/USD reaction as the Fed figures out its loosening strategy