The event we had circled as the dominant two-sided risk broke against us this week. Nonfarm payrolls for June increased by 57,000, slower than the downwardly revised 129,000 added in May and worse than the 115,000 Dow Jones consensus forecast — a miss that triggered heavy dollar selling and directly whipsawed our two tactical dollar-short legs (GBP/USD and EUR/USD). US 2-year yields are now down 5 bps to 4.11% and that's led to some heavy US dollar selling with USD/JPY down about 85 pips on the release, unwinding the mid-June dollar bid and letting the yen give back its hawkish-BoJ gains across our yen-cross shorts. On the trade front, USTR Ambassador Jamieson Greer confirmed that the United States "did not agree to renew the USMCA in its current form," while Mexico and Canada each confirmed their support for extending the Agreement — CAD-negative but no cliff-edge, since the USMCA remains in full force. Current tariff preferences, rules of origin, and investment protections are unaffected, so the crowded-CAD-short squeeze still has not fired.
How our views are tracking
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Long SGD/CHF — thesis weakened Soft Swiss CPI plus the SNB's newly qualified "if necessary" intervention language diluted the franc-cap leg, pushing our top-ranked trade fractionally offside for the first time. |
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Short CAD/JPY — thesis unchanged The USMCA non-renewal added a CAD-negative impulse but the post-NFP yen spike faded within two sessions, leaving both structural legs valid yet cancelling in this double-short cross. |
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Short NZD/JPY — thesis weakened tactically Last week's clearest winner round-tripped most of its gain as the yen gave back its bid, though the structural short stays intact with the RBNZ set to hold July 8. |
Invalidator watch
No level-based invalidator has technically triggered — the two dollar-short stops (EUR/USD near 1.1350, GBP/USD near 1.3000) have actually moved further away, but for these tactical shorts that means distance from profitability, not safety, as spot retreats past entry. The genuinely new risk is the SNB's diluted intervention stance, which was not in our original franc-cap thesis and weakens the SGD/CHF setup at the margin; all positions remain valid on the letter, but both dollar shorts demand active management this week.
Next week
| Wed Jul 08 | RBNZ OCR decision | Affects: NZD/JPY, NZD/USD |
| Tue Jul 14 | US CPI (June) | Affects: EUR/USD, GBP/USD, USD/JPY |
| Wed Jul 15 | Bank of Canada + MPR | Affects: CAD/SGD, CAD/JPY, USD/CAD |
| Mon Jul 20 | USMCA US–Mexico Round 3 (Mexico City) | Affects: CAD crosses |
The single most important event is the July 14 US CPI: after the soft payrolls print, a cool inflation reading would compound the dollar reversal and deepen the pain in both dollar shorts, while a hot print rescues them and re-arms the September-hike case. Westpac expects the RBNZ to hold the OCR at 2.25% at its 8 July meeting, and said it expects that decision to draw far less debate than the central bank's May meeting, raising the possibility it could even be reached by consensus rather than a split vote — a low-drama hold that keeps NZD structurally soft into September, supportive of our NZD/JPY short.
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