Edward Hayden-Briffett
Research Analyst, The Officials
USD Continues to Weaken, Gold Stands Out, Gilts Modestly Softer
Weak US jobs cooled Fed hike bets, USD slipped, gold rallied, while JPY stayed in focus amid intervention warnings.
The USD continues to weaken from recent highs, as rate hike expectations are tempered.
Chair Warsh made comments comments that inflation may not be as dramatic as feared and NFP data was weak yesterday. Treasury cash markets are closed for the July 4 holiday, but futures are firmer, with TYU6 around 109-21. Fed hike pricing has eased, with December 2026 pricing down to +30.8bp from +37.5 yesterday.
The US added only 57k jobs in June, far below expectations of 110k. The previous two months were also revised down. The unemployment rate did fall to 4.2%, though this was driven by the labour-force participation drop to 61.5%, its lowest in over five years; there are signals workers are stepping out of the labour force. Consumer confidence remains fragile and real-wage growth is lagging behind recent inflation readings.
JPY remains a key FX focus, with USD/JPY (Fig 1) trading around 160.97 after a 160.49–161.52 Asia range, pressured by broader dollar weakness and renewed Japanese intervention jawboning. Officials again warned they can take “appropriate action” on FX at any time. The options board is important today because large expiries are clustered close to spot: $1.08bn at 160.00, $1.13bn at 160.50 and $1.36bn at 161.50 for the NY cut, with further large strikes on July 6 at 160.00, 160.50 and 161.75.
Gold is the standout cross-asset mover (Fig 2). The weak NFP print has sidelined Fed hawks and revived demand for duration-sensitive assets, with gold now at $4,175/oz, up around 5.7% from Tuesday’s low. Buyers twice defended the $3,950 area after breaks below $4,000, and price is now testing the 20-day EMA at $4,174.
Gilts are modestly softer in a bear-steepening move: 2Y 4.120%, 10Y 4.783%, 30Y 5.522%. The curve is positively sloped, with 2s10s near +66bp and 10s30s around +74bp. Long-end underperformance keeps fiscal/supply and term-premium concerns in focus despite softer global data.
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