The US dollar weakened on Thursday ahead of the closely watched US employment report, which could either reinforce or challenge market expectations for additional Federal Reserve interest rate hikes this year. Meanwhile, oil prices continued to decline, while semiconductor stocks remained under pressure after their strong performance during the previous quarter.

Money markets are currently pricing in one Federal Reserve rate hike by October, with roughly a 40% chance of a second increase before the end of the year.

If Thursday’s US jobs report — released a day earlier than usual because of Friday’s Independence Day holiday — comes in stronger than expected, it could reinforce those expectations and push both US Treasury yields and the dollar higher.

A weaker-than-expected report, however, could force investors to reassess the outlook for US interest rates.

Economists surveyed by Reuters expect the US economy to have added 110,000 jobs in June, although forecasts vary widely between 25,000 and 200,000 jobs, increasing the potential for a significant surprise.

The unemployment rate is expected to remain unchanged at 4.3%.

Yen jumps amid intervention speculation

The US employment report is attracting as much attention in Tokyo as it is in Washington, with the yen trading near its weakest level in almost 40 years against the dollar and investors increasingly focused on the possibility of intervention by Japanese authorities.

In a move that highlighted those concerns, the yen suddenly surged during early European trading on Thursday, sending the dollar down 0.9% to ¥161.15.

The exact cause of the move was not immediately clear, although analysts noted that it was less dramatic than previous market reactions linked to official intervention.

Takeshi Ishida, market strategist at Kansai Mirai Bank, said: “If this move was intervention-related, it was relatively limited. The Japanese government may have acted ahead of potentially strong US employment data. I had expected intervention if the yen weakened toward the ¥163–¥164 range against the dollar.”

He added: “Intervention would be more effective if the US jobs report comes in weak, because it would become more difficult for the Federal Reserve to justify raising interest rates.”

Dollar retreats against major currencies

The dollar also weakened against several major currencies as traders adjusted positions ahead of the employment data release.

The euro rose 0.3% to $1.1417, while sterling gained 0.6% to $1.3353.

The yen also advanced against both the euro and the British pound.

In the bond market, the yield on the benchmark 10-year US Treasury note rose two basis points to 4.99%.

Gold prices rose in European trading on Thursday, extending their recovery for a second consecutive session from seven-month lows and moving back above the $4,000-an-ounce level, supported by a weaker US dollar and lower global oil prices.

Less hawkish comments from Federal Reserve Chair Kevin Warsh, coupled with softer US economic data, have reduced expectations for additional US interest rate hikes this year.

Markets are now awaiting the June US employment report later on Thursday, which is being released 24 hours earlier than usual due to the Independence Day holiday on Friday in the United States.

The Price

• Gold prices rose 1.25% to $4,080.77 an ounce, up from an opening level of $4,031.37, after touching an intraday low of $4,031.37.

• At Wednesday’s settlement, gold gained 0.6%, recording its first advance in three sessions after falling to a seven-month low of $3,942.55 an ounce on Tuesday.

US dollar

The US Dollar Index fell 0.5% on Thursday to a one-week low of 100.92 and is on track for its first decline in three sessions, reflecting weakness in the greenback against a basket of major and minor currencies.

Federal Reserve Chair Kevin Warsh said on Wednesday that inflation expectations and price risks have eased in recent weeks, while reaffirming his commitment to the Fed’s 2% inflation target.

The US private sector added fewer jobs than expected in June, while manufacturing activity slowed more than anticipated according to the latest Institute for Supply Management survey.

Those comments and economic releases have reduced expectations that the Federal Reserve will raise interest rates at least once more this year.

Global oil prices

Oil prices fell around 1.0% on Thursday, extending losses for a third straight session and reaching their lowest levels in five months as tensions in the Strait of Hormuz continued to ease, allowing more supertankers to move through the vital shipping route.

Lower oil prices help reduce inflation concerns and reinforce expectations that central banks may keep monetary policy settings unchanged for an extended period this year.

US interest rates

• According to the CME FedWatch Tool, the probability of the Federal Reserve leaving interest rates unchanged at its July meeting increased from 66% to 71%, while the probability of a 25-basis-point rate hike declined from 34% to 29%.

• Markets are also pricing a 15% probability that rates remain unchanged by December, compared with an 85% probability of a 25-basis-point increase by year-end.

US jobs report

To reassess those expectations, investors are awaiting the monthly US employment report later on Thursday, which will provide key insights into labor market conditions, including nonfarm payrolls, the unemployment rate, and average hourly earnings.

The report is scheduled for release at 12:30 GMT.

Market expectations point to the US economy adding 114,000 jobs in June, down from 172,000 in May. The unemployment rate is expected to remain unchanged at 4.3%, while average hourly earnings are forecast to rise 0.3% month-on-month, matching the previous reading.

Gold outlook

• Nicolas Frappell, Global Head of Institutional Markets at ABC Refinery, said: “The market is cautious about selling short here because we are seeing some negative signals being quickly rejected.”

• Frappell added: “The ADP data came in slightly below expectations, which likely explains part of the move higher in gold prices, as some investors believe it could foreshadow weaker nonfarm payrolls data.”

SPDR Gold Trust

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by 0.28 metric tons on Wednesday, lifting total holdings to 1,005.36 metric tons from 1,005.08 metric tons, which had been the lowest level since September 24, 2025.

The euro rose modestly in European trading on Thursday against a basket of global currencies and is on track for its first gain in three sessions against the US dollar, benefiting from a softer greenback ahead of the release of the June US employment report.

Following less hawkish comments from European Central Bank President Christine Lagarde and weaker-than-expected eurozone inflation data for June, market expectations for another ECB rate hike this year have declined significantly.

The Price

• EUR/USD rose around 0.1% to $1.1388, from an opening level of $1.1377, after touching an intraday low of $1.1372.

• The euro ended Wednesday down 0.4% against the dollar, marking its second consecutive daily loss, pressured by Lagarde’s remarks and weaker European inflation figures.

US dollar

The US Dollar Index fell 0.1% on Thursday and is heading for its first decline in three sessions, reflecting a moderation in the US currency against a basket of major global peers.

Federal Reserve Chair Kevin Warsh said on Wednesday that inflation expectations and price risks have eased in recent weeks, while reaffirming his strong commitment to the central bank’s 2% inflation target.

The US private sector added fewer jobs than expected in June, while manufacturing activity slowed more sharply than anticipated according to the latest Institute for Supply Management survey.

Those comments and economic releases reduced expectations that the Federal Reserve will raise interest rates at least once more this year. Investors now await the June US employment report later on Thursday, which is being released a day earlier than usual because of Friday’s Independence Day holiday in the United States.

According to the CME FedWatch Tool, the probability of the Federal Reserve keeping interest rates unchanged at its July meeting increased from 66% to 71%, while the probability of a 25-basis-point rate hike declined from 34% to 29%.

Markets are also pricing a 15% probability that rates remain unchanged by December, compared with an 85% probability of a 25-basis-point increase by year-end.

Global oil prices

Oil prices fell around 0.5% on Thursday, extending losses for a third consecutive session and hitting their lowest levels in five months as tensions in the Strait of Hormuz continued to ease, allowing more supertankers to move through the vital shipping route.

Lower oil prices help reduce inflation concerns and support expectations that major central banks could keep monetary policy settings unchanged for an extended period this year.

Christine Lagarde

Speaking on Wednesday in Sintra, Portugal, ECB President Christine Lagarde said risks surrounding inflation and economic growth in the eurozone have become more balanced compared with a few weeks ago, largely due to the recent decline in oil prices.

Eurozone inflation

Data released on Wednesday showed headline eurozone consumer prices rose 2.8% year-on-year in June, below market expectations of a 3.0% increase and down from 3.2% in May.

Core consumer prices rose 2.4% annually in June, also below expectations of 2.5%, compared with 2.6% in the previous month.

European interest rates

• Following Lagarde’s comments and the inflation data, money markets sharply reduced expectations for a 25-basis-point ECB rate hike in July, with pricing falling from 30% to just 5%.

• Investors now await additional eurozone data on inflation, unemployment, and wage growth to reassess the outlook for ECB policy.

• Reports suggest the ECB is considering pausing its policy normalization process in July if energy prices remain near current levels.

The Japanese yen edged higher in Asian trading on Thursday against a basket of major and minor currencies, attempting to recover from its lowest level in 40 years against the US dollar and heading toward its first gain in four sessions, supported by limited buying interest at depressed levels.

The US currency is facing downward pressure as oil prices slide to their lowest levels in five months, reinforcing expectations that inflationary pressures on the Federal Reserve may ease and reducing the likelihood of further US interest rate hikes this year.

The yen’s proximity to its weakest level since 1986 has intensified speculation that Japanese authorities could intervene in the foreign exchange market to support the local currency, with traders increasingly viewing Friday’s US market holiday as a potential window for action.

The Price

• USD/JPY fell by less than 0.1% to ¥162.48, from an opening level of ¥162.57, after touching an intraday high of ¥162.60.

• The yen ended Wednesday down by less than 0.1% against the dollar, marking its third consecutive daily loss and hitting a fresh 40-year low of ¥162.84 amid concerns over the widening yield gap between US Treasury bonds and Japanese government bonds.

US dollar

The US Dollar Index fell 0.1% on Thursday and is on track for its first loss in three sessions, reflecting a modest pullback in the greenback against a basket of global currencies.

Federal Reserve Chair Kevin Warsh said on Wednesday that inflation expectations and price risks have eased in recent weeks, while reaffirming his strong commitment to the Fed’s 2% inflation target.

The US private sector added fewer jobs than expected in June, while manufacturing activity slowed more than anticipated according to the latest Institute for Supply Management survey.

Those comments and economic reports have reduced expectations for at least one Federal Reserve rate hike this year. Investors now await the June US employment report later on Thursday, released 24 hours earlier than usual due to the Independence Day holiday on Friday.

According to the CME FedWatch Tool, the probability of the Federal Reserve leaving interest rates unchanged at its July meeting rose from 66% to 71%, while the probability of a 25-basis-point rate hike declined from 34% to 29%.

Markets are also pricing a 15% probability of no change by December and an 85% probability of a 25-basis-point rate increase by year-end.

Global oil prices

Oil prices fell around 0.5% on Thursday, extending losses for a third consecutive session and reaching their lowest levels in five months as tensions in the Strait of Hormuz continued to ease, allowing more supertankers to pass through the vital shipping route.

Lower oil prices are expected to reduce inflation concerns, supporting the case for major central banks to keep monetary policy settings unchanged for an extended period this year.

Japanese authorities

Japanese Finance Minister Satsuki Katayama said the government stands ready to take appropriate action against excessive exchange-rate volatility, adding that decisive measures remain on the table in line with agreements reached between Japan and the United States.

The yen’s decline to a 40-year low has revived speculation that Japanese authorities could return to the market after spending a record ¥11.7 trillion ($73.5 billion) in April and May to defend the currency against excessive moves.

Analysis and comments

• Kristy Tan, Global Market Strategist at Franklin Templeton Institute, said intervention could slow the pace of the currency’s decline, curb excessive speculation, and send a signal that authorities are uncomfortable with current market conditions, but it cannot change the broader trend.

• Tan added that as long as investors can borrow cheaply in yen and earn higher returns through dollar-denominated assets, carry trades will continue to weigh on the Japanese currency.

• Traders see Friday’s US holiday as a favorable opportunity for the Bank of Japan to buy yen, as thinner liquidity could magnify the impact of any intervention while reducing its cost.

• Matt Simpson, Senior Market Analyst at StoneX, said Japan’s Ministry of Finance would intervene if it could, but understands that it is currently swimming against the tide of a hawkish Federal Reserve.

• Simpson added that if US data delivers a surprise in favor of monetary easing advocates, Japanese authorities may intervene more aggressively by taking advantage of a weaker dollar. Until then, the market is likely to view official warnings as little more than rhetoric.

Japanese interest rates

• Market pricing for a 25-basis-point rate hike by the Bank of Japan at its July meeting remains below 25%.

• Investors are awaiting additional data on inflation, unemployment, and wage growth in Japan to reassess those expectations.