US Dollar holds steady ahead of US NFP

LONDON (June 3) The US Dollar (USD) is treading water on Thursday, trading flat in a tight range as traders turn their focus to the upcoming Nonfarm Payrolls (NFP) report at 12:30 GMT.

With volatility subdued, the US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, is hovering around 96.80 during the European session, as traders adopt a wait-and-see approach ahead of the pivotal US employment data.

The DXY failed to reclaim the 97.00 mark on Wednesday following a weaker-than-expected ADP Employment Change report. The data showed that US private sector employers cut 33,000 jobs in June, falling well short of expectations for a 95,000 increase. The surprise decline raised fresh concerns about the health of the labor market and reinforced dovish Federal Reserve (Fed) expectations, keeping the US Dollar anchored near over three-year lows.

The private jobs report also prompted a shift in interest rate cut bets, with traders now pricing in a 25% chance of a July rate cut, up from 20% a day earlier, according to the CME FedWatch Tool.

Building on this cautious mood, the US Dollar has declined by more than 10% over the past six months. The US Dollar remains vulnerable as broader macroeconomic and policy uncertainties increase pressure. Lingering concerns over the US President Donald Trump’s proposed tariffs and an increasingly fragile fiscal situation have dampened investor confidence. The combination of trade policy risks and rising government spending is fueling worries about long-term economic stability, reducing the demand for the Greenback.

• Ahead of the July 9 tariff deadline, a fresh trade agreement between the US and Vietnam helped calm investor nerves, with Washington agreeing to ease tariff pressure in exchange for greater market access for American goods. The deal includes a 20% duty on Vietnamese exports and a 40% tariff on goods rerouted through Vietnam from third countries, notably China. In return, Vietnam will reduce barriers on US goods, allowing certain American products to enter duty-free. The deal, which is softer than the initially proposed 46% blanket tariff, helped ease trade tensions.
• The US–Vietnam trade agreement eased some market concerns, but questions remain over its broader implications. Saxo’s Charu Chanana noted the deal was “broadly positive,” though she highlighted that the 20% tariff is more aggressive than expected and higher than the 10% baseline. "What's important to watch now is how China responds, given that the move directly targets trans-shipped goods at a higher 40% tariff rate."
• With the July 9 deadline approaching, the US is pushing key allies — including Japan, South Korea, and the European Union — to finalize trade agreements or face steep new tariffs, reportedly as high as 50% on certain imports. While some negotiations have made progress, others remain uncertain. Japan has pushed back firmly, with Prime Minister Shigeru Ishiba stating that Tokyo “will protect national interests at all costs,” signaling resistance to Washington’s demands. Meanwhile, South Korea's President Lee Jae Myung said on Thursday that negotiations were looking difficult and that he could not say whether talks would conclude by next Tuesday, while German officials are urging swift action to avoid disruptions to vital export sectors. The looming tariff threat is adding to global trade anxiety and keeping markets on edge.
• Trade tensions between the US and China showed signs of easing after Washington lifted key export restrictions on chip design software and ethane shipments. US firms such as Synopsys, Cadence, and Siemens have been allowed to resume sales of Electronic Design Automation (EDA) tools to Chinese clients, while licensing rules on ethane exports were rolled back, reopening a major trade flow that had stalled in June. The policy shift follows China’s move to ease restrictions on rare earth exports, signaling a mutual step toward trade normalization. While broader issues remain unresolved, the latest actions have boosted optimism around US–China relations.
• The sweeping tax‑and‑spending “One Big Beautiful Bill” advanced in the House this week but remains on shaky ground as internal Republican divisions grow. While the bill narrowly cleared a key procedural hurdle with a 219–213 vote, several GOP lawmakers have raised concerns over deep spending cuts, rising deficits, and potential blowback ahead of the November elections. Despite strong pressure from US President Trump, who has urged rapid passage to meet a self-imposed July 4 deadline, opposition from fiscal conservatives could delay or derail final approval. As of press time, the House was still debating the package, and investors are closely watching the outcome, given its potential impact on federal debt levels and broader market sentiment.
• Looking ahead, all eyes are on Friday’s Nonfarm Payrolls report, a key test for market sentiment and Fed policy expectations. The data is expected to show a modest gain of around 110,000 jobs alongside a possible uptick in the unemployment rate to 4.3%. A softer reading could reinforce the case for a Fed Interest rate cut as early as July, while a stronger print may prompt policymakers to hold off. With the labor market showing early signs of cooling, the report is poised to be a major catalyst for the direction of the US dollar and overall risk sentiment heading into next week.

FXStreet