On the surface, things are still going well in the US – Commerzbank

The hard US data still looks pretty good and that there are no real signs of the feared stagflation yet. This is hardly surprising, as most tariffs have been suspended for 90 days, so markets are unlikely to see any effects until the tariffs are actually put in place. Unless they are suspended further, this would be the case in mid-July, i.e. in the second half of the year, Commerzbank's FX analyst Antje Praefcke notes.

Hard US data still looks reasonable

"The great uncertainty is certainly already having an impact on corporate decisions, even if this is not yet really visible in the hard data. At least weakening sentiment indicators such as the ISM index for manufacturing and services suggest that something is afoot among businesses and consumers. But for now, we will probably have to accept that the fundamentals in the US will remain quite strong for some time, especially the labor market, as tomorrow's June labor market report is likely to confirm."

"Don't let the weak ADP index ('only' 37k private sector jobs created), which already weighed on the US Dollar (USD) yesterday, scare you – it underestimated the official data by 63k in February, 54k in March, and 105k in April. We have often repeated that the ADP index is not a good indicator for NFP numbers."

"The fact that the hard data still looks reasonable would be one – albeit very simple – explanation for why interest rate and currency markets are diverging somewhat: the interest rate market is reacting more strongly to the inflation outlook influenced by tariffs, whereas the FX market is focusing more on the (still) decent growth figures and outlook. However, the sword of Damocles in the form of the tarnished status of the USD and US government bonds as safe havens affects both equally."