Can the USD break down even before key US data this week?

Big bad bill for the US dollar?
Many are noting something in the House version of Trump’s “big, beautiful bill” that has been there all along, but is getting more coverage now: section 899. This section of the bill threatens foreign actors that implement tax policies that are seen as “unfair” or “discriminatory” and leaves wide room for interpretation, but is basically read as providing the means to tax foreign capital investing in any US assets if countries, for example, move against US info-tech giants with digital services taxes for example (particularly a concern for the EU due to its Digital Services Act). But the bill could even result in taxes on, for example, US treasury coupon payments on foreign holders of US treasuring, including official ones and those of sovereign wealth funds that have traditionally escaped taxation. This potential power play against foreign holdings of US-based assets could eventually slow interest in recycling surpluses into US capital markets, obviously USD-negative in flow terms on major players looking for alternatives to US assets.

Looking ahead
This is the first week of the month, with all of the usual key US data, which could serve to brake or accelerate US dollar weakness, particularly the jobs report on Friday. A quick rundown of the key event risks for the week ahead:

• US May ISM Manufacturing (today at 1400 GMT) – not usually a market mover, but interesting for color and for the employment component, where the 3-month moving average has been below 50 (in contraction) for more than two years.
• Eurozone CPI (Tuesday). Could prove an important input for how dovish the ECB guides – more below.
• US Apr. JOLTS Job openings (Tuesday)  This data point gets too much attention, given the weak response rates and heavy revisions, not to mention that it is tardy relative to other labor market data, but the market can’t help itself in reacting.
• US May ADP Employment Change (Wednesday) The market will prove touchy to all US data releases this week as long as USD near key technical levels.
• US May ISM Services Index (Wednesday) The US Services sector dominates – also watching the employment sub-index here after a volatile couple of months.
• US Weekly Initial Jobless Claims (Thursday) The market will jump all over this data point if we see another elevated reading, as this data series has failed to print two higher-than-expected readings in a row in almost a year.
• ECB meeting (Thursday). The ECB will cut 25 basis points to take the deposit rate down to 2.00%, with more focus on the guidance now that the ECB is reaching its “neutral rate”. July is only priced at about 25% odds of a further cut.
• US May Nonfarm Payrolls Change / Unemployment Rate (Friday) – This is the usual arbiter on where the US jobs market is at, with consensus expectations for the Nonfarm Payrolls are at +125k after 177k in April.
• Canada May Employment Report (Friday)– The Canadian economy is in a world of hurt, with the latest jump in steel and aluminum tariffs doing Canada no favours. Important to note that Canada’s mortgages reset after five years, so now we are hitting the mortgages that came 5 years after the pandemic breakout, when many refinanced due to very low rates. This will add pressure on many household budgets.

FX Board of G10 and CNH trend evolution and strength.
Note: If unfamiliar with the FX board, please see a video tutorial for understanding and using the FX Board.

The US bearish trend intensifying here, and the Chinese renminbi tilting in the US dollar’s direction as usual, with AUD likely underperforming for the same reason (it’s exposure to China, but also its awkward status as a defense ally of the US when US and China tensions are heating up).