Hot NFP, Dollar Soars to 2-Month High
The US dollar strengthened sharply on Friday (June 5th) and hit a nearly two-month high, supported by a combination of solid labor data and fading hopes for a diplomatic breakthrough in the Middle East. The dollar index (DXY) rose 0.7% to 100.06 and is on track to gain around 1.2% this week, as markets repositioned themselves for a scenario of higher US interest rates for longer.
The dollar's strength was driven by the May Nonfarm Payrolls report, which reported the addition of 172,000 jobs, well above the 85,000 expected, while unemployment remained at 4.3%. Revised March and April data also added 93,000 jobs. This series of data reinforces the view that the "maximum employment" side of the Fed's mandate remains intact, bringing market focus back to inflation—especially amidst persistently high energy prices.
Interest rate repricing pushed yields up and pressured bonds, as investors dumped debt as the likelihood of a rate hike increased. Derivatives markets are now fully pricing in a 25-bps hike before the end of the year, providing immediate support for the dollar. At the same time, rising yields and interest rate risks weighed on US equities on Friday.
Geopolitically, the peace process was again in doubt after Hezbollah rejected the US-brokered Israel-Lebanon ceasefire—a move once seen as a bridge to a broader US-Iran agreement. Iran has made an end to the war in Lebanon a key condition, while the Strait of Hormuz remains virtually closed, maintaining pressure on global energy inflation. Although oil prices weakened on the day, the benchmark contract was still trending higher weekly.
Elsewhere in the forex market, the euro weakened to around $1.1525 after data showed Eurozone GDP contracted 0.2% in the first quarter of 2026, while the pound fell to $1.3335. The Japanese yen also remained fragile, retracing the 160-per-dollar level, heightening market concerns about the risk of Tokyo intervention. (Arl)
Source: Newsmaker.id
