The US has unveiled new tariffs coming into effect on 7 August. The base rate for most countries has remained at 10% but other trading partners (like Canada, Switzerland and New Zealand) are hit with tariffs of up to 41%. Markets continue to treat this with some diffidence, probably on the view that deals are still likely to be agreed in the coming weeks. We don’t expect any meaningful implications for the dollar in the near term, ING's FX analyst Francesco Pesole notes.

FX market is fundamentally data-driven at this point

"A round-up of yesterday’s US data. The core PCE deflator rose 0.3% month-on-month as per consensus (0.26% rounded), failing to show any particularly concerning uptick just yet. Personal income and spending increased 0.3% nominally, with real spending up 0.1%. The employment cost index, a broad measure of labour costs, rose 0.9% quarter-on-quarter, slightly above the 0.8% forecast, leaving private wage growth at 3.5% year-on-year - consistent with 2% inflation over time. Initial jobless claims were largely unchanged, ticking up to 218k from 217k, while continuing claims held steady at 1,946k."

"Overall, no data points were particularly market-moving, nor did they firmly argue for another leg lower in the dollar. DXY ticked higher mostly on the back of the post-Bank of Japan yen selloff, but the dollar was mixed against G10. In our view, the growth reassessment after the EU-US deal and the Federal Reserve’s hawkish stance is unlikely to have a lasting imprint: the FX market is fundamentally data-driven at this point."

"Today’s jobs data presents the best chance for the USD to take an extra leap higher before some pre-CPI (12 August) calm leaves the dollar exposed to medium-term bearish repositioning. Payrolls’ consensus is 104k, the whisper number is 120k, and our call 115k. Fed Chair Jay Powell has placed greater emphasis on the unemployment rate, which is expected to rise marginally from 4.1% to 4.2% - hardly enough to sound the alarm on the jobs market. We expect a 115k, 4.2% scenario as only marginally positive for the dollar. After this week’s big run, it could simply lead to some consolidation. ISM manufacturing for July is also released today and is expected to have ticked higher, but the impact on FX should be considerably more limited. "