The U.S. dollar recorded its largest weekly decline since April after weaker employment data reduced expectations for an early Federal Reserve interest rate increase.

The euro gained against the dollar, while the Japanese yen moved away from its weakest level in around 40 years. Oil prices remained sensitive to developments in the Strait of Hormuz.

This week, traders may focus on the Reserve Bank of New Zealand, Federal Reserve meeting minutes and Canadian employment data.

Key Market Takeaways

• U.S. job creation slowed sharply in June.
• Eurozone inflation eased but remained above the European Central Bank’s target.
• U.S. manufacturing activity continued to expand.
• Oil supply risks around the Strait of Hormuz remained a key market concern.
• Central bank updates may drive NZD, USD and EUR pairs this week.

What Moved the Forex Market Last Week?

US Job Growth Slowed

NFP, or Non-Farm Payrolls, increased by 57,000 in June. NFP measures the number of jobs added or lost in the United States, excluding farm workers and several other categories.

The unemployment rate was 4.2%. However, fewer people participated in the labour market, which helped lower the unemployment rate.

The weaker job growth reduced expectations for a near-term Federal Reserve interest rate increase. The dollar index fell by about 0.5% during the week.

Lower interest rate expectations can weaken a currency because investors may receive smaller returns from assets linked to it.

Eurozone Inflation Eased

Eurozone inflation slowed to 2.8% in June from 3.2% in May.

Inflation measures how quickly the prices of goods and services increase. The slowdown may reduce pressure on the European Central Bank to raise interest rates again soon.

However, inflation remained above the central bank’s 2% target. This means future decisions may continue to depend on new economic data.

US Manufacturing Continued to Expand

The U.S. ISM Manufacturing PMI reached 53.3 in June.

PMI, or Purchasing Managers’ Index, measures business activity. A reading above 50 normally shows expansion, while a reading below 50 shows contraction.

The result showed that manufacturing continued to grow. However, the positive report was not enough to offset concerns about weaker employment growth.

The Yen Recovered From Historic Lows

The Japanese yen strengthened slightly after trading near its weakest level since 1986.

Markets remained alert to possible intervention from Japanese authorities. Currency intervention happens when a government or central bank enters the market to influence the value of its currency.

USD/JPY may remain sensitive to comments from Japanese officials and changes in U.S. interest rate expectations.

Hormuz Supply Concerns Eased Slightly

Oil shipments through the Strait of Hormuz continued to recover as some tanker traffic resumed.

The Strait is an important route for global oil and gas supplies. Any disruption can raise energy prices, shipping costs and inflation concerns.

Oil prices were almost unchanged over the week as improving supply flows balanced uncertainty surrounding U.S.-Iran relations.

What to Watch This Week

Monday: US Services Activity

The U.S. ISM Services PMI may show whether activity in the country’s largest economic sector remains strong.

A major change in services activity could affect expectations for U.S. growth and Federal Reserve policy.

Wednesday: RBNZ Rate Decision and Fed Minutes

The Reserve Bank of New Zealand will announce its Official Cash Rate, or OCR. The OCR is the interest rate used to guide borrowing costs across New Zealand’s economy.

The Federal Reserve will also release the minutes from its June meeting. The minutes provide a detailed record of officials’ discussion about inflation, employment and interest rates.

These events may create movement in NZD/USD and other dollar pairs.

Thursday: ECB Meeting Account

The European Central Bank will publish the account of its June policy meeting.

Markets may examine the report for signs of how officials view inflation and future interest rate decisions.

Friday: Canadian Employment Report

Canada will release its June Labour Force Survey, which includes employment changes and the unemployment rate.

The report may affect the Canadian dollar, particularly when combined with changes in oil prices.

Weekly Forex Market Summary

The dollar entered the week under pressure after weaker U.S. job growth reduced expectations for an early interest rate increase.

NZD/USD may receive attention because the RBNZ decision and Federal Reserve minutes are scheduled on the same day. USD/CAD may also react to Canadian employment figures and changes in oil prices.

The Strait of Hormuz remains the main geopolitical risk. Renewed conflict or slower tanker traffic could quickly affect oil prices, inflation expectations and commodity-linked currencies.

Disclaimer

This article is for informational and educational purposes only and does not constitute financial advice. Trading involves risk. Conduct your own analysis or consult a qualified professional before making financial decisions.