U.S. Dollar Strengthens After Positive Nonfarm Payroll Data
Key Points:
- Content: The U.S. dollar strengthened following the release of better-than-expected nonfarm payroll data for May, showing continued resilience in the labor market.
- Market Impacts: The stronger dollar led to a decline in the euro and limited losses against the yen, affecting currencies and global markets.
- Technical Analysis & Latest Price: EUR/USD fell to around 1.0804, USD/JPY stabilized near 156.65, and investors revised their expectations on future Fed rate cuts amid sticky U.S. wage growth.
Content
The U.S. dollar rose on Friday, June 7, 2024, after the latest U.S. nonfarm payroll (NFP) report showed that 272,000 new jobs were added in May — well above the forecast of 185,000 jobs. Despite a slight uptick in the unemployment rate to 4.0%, the solid job growth signals that the U.S. labor market remains robust. Additionally, wages increased 0.4% month-on-month, indicating inflationary pressures are still present. This kind of economic data makes it less likely that the Federal Reserve will reduce interest rates soon, since higher employment and wages can contribute to inflation.
Market Impacts
As a result of the stronger payroll numbers, the dollar gained significantly against the euro, with EUR/USD slipping to around 1.0804. It also pared earlier losses against the yen, moving back up toward 156.65. The U.S. 10-year Treasury yields rose to around 4.43%, reflecting investors’ shifting views on the Fed’s monetary policy path. Meanwhile, risk-sensitive currencies like the Australian and New Zealand dollars weakened as markets moved toward safe haven assets like the dollar.
Technical Analysis & Latest Price
From a market charting perspective, EUR/USD broke below its 200-day moving average, showing possible downside technical momentum, with potential support near 1.0770–1.0785. USD/JPY maintained strength above the 156 level, continuing its uptrend, although expectations persist that Japanese authorities might intervene if the yen weakens too much. As of the latest data:
- EUR/USD: 1.0804
- USD/JPY: 156.65
- Gold prices: fell to around $2,294/oz as the dollar rallied
- U.S. Dollar Index (DXY): rose above 104.90
Additional Takeaway
This report highlights how crucial economic data, like jobs and wages, can drastically impact currencies and global markets. The strong U.S. labor data shows that the Fed might hold off on interest rate cuts until inflation comes down more significantly. For everyday investors, this means the dollar could stay strong in the near term, making international travel and imported goods potentially more affordable. Long-term traders should watch central bank signals closely, especially as new inflation and consumer spending data emerges in the coming weeks.
Hot Take
Despite earlier hopes of summer interest rate cuts, the U.S. economy might be running too hot for the Fed’s comfort. The strong jobs data keeps dollar bulls in play, but that also keeps the pressure on inflation-sensitive assets like gold and risk-heavy currencies. Traders and investors may need to adjust their strategies — the “higher for longer” interest rate narrative might stick around longer than expected.
