Forex Today: US Dollar holds firm on mixed US data, central bank remarks and NFP caution

Here is what you need to know for Thursday, July 2:

The US Dollar Index (DXY) held near the 101.40 area, supported by resilient manufacturing activity and elevated long-term Treasury yields. The US ISM Manufacturing PMI slipped to 53.3 in June from 54.0 in May, missing expectations but staying above the 50.0 expansion line. New Orders eased to 56.0, while the Prices Paid Index fell to 73.0 from 82.1, suggesting that input prices cooled but remained elevated.

ADP private payrolls came in below expectations at 98,000 in June, slowing from May’s 122,000 gain. The softer labor market reading limited the Greenback’s upside and added caution before the official US jobs report, which is expected to show a slower pace of hiring while the Unemployment Rate remains near 4.3%.

On the Federal Reserve (Fed) side, Chair Kevin Warsh reaffirmed the 2% inflation target and said the Fed would not tolerate inflation staying above target, although he avoided giving direct guidance on the July decision.

EUR/USD remained under pressure near the 1.1380 area as investors weighed softer Eurozone inflation against comments from European Central Bank (ECB) and Federal Reserve (Fed) officials. Eurozone annual HICP inflation fell to 2.8% in June from 3.2% in May, below expectations of 3.0%, while core inflation also eased to 2.4% from 2.6%.

ECB President Christine Lagarde said that inflation and growth risks in the Eurozone are now more balanced after the recent decline in energy prices. ECB policymaker Alexander Demarco also warned that the central bank should not rush into another rate hike, noting that lower energy prices could help stabilize inflation expectations.

GBP/USD traded around the 1.3280 area, holding cautiously as traders digested comments from Bank of England (BoE) Governor Andrew Bailey. On Tuesday, Bailey said the BoE has time to judge the pass-through of higher energy prices to the United Kingdom (UK) economy, while warning that UK inflation could still rise to 3.2% later this year.

USD/JPY hovered near 162.50, unchanged. Softer ADP data helped limit further upside in the US Dollar. Investors also remain alert for possible warnings of Japanese intervention as the Yen trades near multi-decade lows.

AUD/USD fell toward the 0.6890 area as the Australian Dollar (AUD) struggled against a firmer Greenback. The Aussie remains vulnerable ahead of Thursday’s Australian Trade Balance data, with investors watching whether exports can continue to support the currency.

West Texas Intermediate (WTI) Oil dropped toward a three-month low near the $68.00 area as easing supply concerns weighed on energy prices. Optimism around US-Iran talks eased fears of disruptions in the Strait of Hormuz, while markets also assessed expectations that OPEC+ could raise output targets.

Gold rebounded toward the $4,050 area after softer ADP employment data and comments from Fed Chair Kevin Warsh helped reduce some inflation-risk concerns.