Fundamental Market Analysis for July 6, 2026 (EURUSD, GBPUSD, USDJPY)

Event to watch today:

17:00 EET. USD – ISM Services PMI

EURUSD:

June data from the euro area provide a mixed but broadly supportive backdrop for the euro. The services activity index rose to 49.4 from 47.7 in May, while the composite indicator returned to growth. Inflation slowed to 2.8%, but the ECB raised interest rates in June and still has room to maintain a cautious policy stance. The improvement in business activity supports the single currency, although the weakness in the services sector has not fully disappeared.

The main shift for EURUSD has come from a reassessment of the US economy. Employment growth in June was weaker than expected, while previous months were revised lower. This reduced the perceived likelihood of a Federal Reserve rate hike by September. The US dollar came under pressure, and the release of the Federal Reserve’s June meeting minutes will test whether the market maintains this revised outlook.

Slower euro-area inflation limits the euro’s upside potential. However, less confident Federal Reserve expectations, the ECB’s June rate increase, and stronger composite business activity create a favourable fundamental balance for the pair. Unless new US data challenge the view of a cooling labour market, the outlook remains tilted towards further EURUSD strength.

Trading idea: BUY 1.1435, SL 1.1405, TP 1.1525

GBPUSD:

Sterling received a fresh domestic signal of economic weakness. The UK services activity index fell to 48.8 in June from 49.3 in May, marking the sharpest contraction since January 2023. New orders have declined for a fourth consecutive month, pointing to weaker consumer and corporate demand. This matters for the pound because services play a central role in the UK economy.

The Bank of England kept its interest rate at 3.75% in June, with two Monetary Policy Committee members voting for an increase. This supports expectations that borrowing costs will remain high. However, weaker services activity may make the central bank more cautious if softer demand begins to affect the labour market and services inflation. That risk limits sterling’s ability to benefit from the US dollar’s weakness following the softer US employment report.

Reduced expectations of a Federal Reserve rate hike are weighing on the US dollar, but this has already helped GBPUSD move higher. Fresh evidence of weaker UK activity creates room for a reassessment, especially as markets focus on the outlook for the Bank of England. In the baseline scenario, pressure on sterling may outweigh the external support, making a bearish GBPUSD scenario more consistent with the current market backdrop.

Trading idea: SELL 1.3350, SL 1.3380, TP 1.3260

USDJPY:

Attention in USDJPY remains focused on the actions of Japanese authorities. After the yen fell to multi-decade lows, Japan’s Finance Minister reiterated on July 3 that the government was prepared to support the currency and confirmed regular contact with US authorities on foreign-exchange matters. This leaves the pair more vulnerable to fresh official comments or concrete measures from Tokyo.

Monetary policy is gradually reducing the US dollar’s advantage. The Bank of Japan raised its interest rate in June and indicated that it may continue tightening policy if economic and inflation conditions develop in line with its forecasts. At the same time, weaker US employment growth has reduced expectations of further Federal Reserve rate hikes and weighed on the US dollar. The interest-rate gap remains significant, but its influence is becoming less one-sided.

Elevated USDJPY levels continue to reflect demand for the higher yields available in US assets. However, the combination of Tokyo’s warnings, the possibility of official action, and less confident Federal Reserve expectations shifts the short-term fundamental balance in favour of the yen. If these conditions persist, the baseline scenario allows for a decline in USDJPY.

Trading idea: SELL 161.85, SL 162.15, TP 160.95

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