Forex News

• The US Dollar strengthens after US job creation significantly exceeds expectations.
• The US labor market remains resilient despite slower wage growth.
• The Reserve Bank of Australia's hawkish stance helps limit downside pressure on the Australian Dollar.

AUD/USD trades around 0.7105 at the time of writing on Friday, down 0.39% on the day, as the US Dollar (USD) gains support following a stronger-than-expected US employment report.

The Bureau of Labor Statistics reported that Nonfarm Payrolls (NFP) increased by 172K in May, following an upwardly revised gain of 179K in April. The market had expected only 85K new jobs. Meanwhile, the Unemployment Rate held steady at 4.3%, while annual wage growth, as measured by Average Hourly Earnings, eased to 3.4% from 3.6% previously.

This combination of a resilient labor market and moderating wage pressures supports the US Dollar (USD), as markets adjusted their expectations toward a more hawkish Federal Reserve (Fed) outlook. According to the CME FedWatch tool, traders currently assign a 41.2% chance to a 25-basis-point rate increase in December, while the odds of rates remaining unchanged stand at 41.6%. The US Dollar Index (DXY) advanced in the immediate aftermath of the release and recovered toward 99.55 at the time of press.

In Australia, the domestic backdrop remains mixed. Analysts at BNY note that the Reserve Bank of Australia (RBA) remains concerned about persistent inflationary pressures, driven by tight labor market conditions and energy-related risks. This environment is encouraging the central bank to maintain a restrictive policy stance despite signs of slowing economic growth.

Recent Gross Domestic Product (GDP) figures disappointed investors and triggered a correction in the Australian Dollar (AUD). Nevertheless, RBA Governor Michele Bullock reiterated this week that bringing inflation under control remains the central bank’s top priority, adding that the Board stands ready to take whatever action is necessary to achieve its mandate of price stability and full employment.

Commerzbank’s Thu Lan Nguyen reports that US Aluminium supply remains tight more than a year after tariffs, with a planned Oklahoma smelter blocked on environmental and ownership grounds. Domestic production has actually fallen, while high prices and import premiums damp demand. The bank warns that market balance may come mainly via demand destruction rather than new capacity.

Tariffs fail to spur domestic capacity

"Even more than a year after the introduction of US import tariffs on aluminium, there is little sign of relief in the supply situation in the United States."

"As a result, a significant expansion of production capacity in the US still appears to be a long time coming. Last year, according to the USGS, aluminium production in the US actually declined, despite the tariffs."

"This applies to both primary and secondary production, although imports of aluminium scrap (which is exempt from the tariffs) increased significantly."

"This is likely also related to weaker demand, which was dampened by high prices. Given the persistently high import premiums, there is a significant risk that the strained US market will be relieved primarily by demand destruction."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• US Nonfarm Payrolls beat expectations by a wide margin in May, with 172K jobs added.
• The US Dollar rebounds after the release, helping USD/JPY recover from its intraday lows.
• Warnings from Japanese authorities continue to limit upside potential near the 160.00 threshold.

USD/JPY trades around 160.00 on Friday at the time of writing, virtually unchanged on the day after rebounding from its intraday lows following the release of the US employment report.

The Bureau of Labor Statistics (BLS) reported that US Nonfarm Payrolls (NFP) increased by 172K in May, following an upwardly revised gain of 179K in April. The figure significantly exceeded market expectations of 85K. Meanwhile, the Unemployment Rate remained steady at 4.3%, while annual wage growth slowed to 3.4% from 3.6% previously.

The report also showed upward revisions to previous months’ data. Payroll gains in March and April were revised higher by a combined 93K jobs, highlighting the continued resilience of the US labor market.

The market reaction was immediate. The US Dollar (USD) strengthened against most major currencies after the release as investors strengthened expectations for Federal Reserve (Fed) monetary tightening this year. According to the CME FedWatch tool, investors now see a 41.2% chance of a 25-basis-point interest rate hike in December, while the likelihood of rates remaining unchanged stands at 41.6%.

The Greenback’s recovery helped USD/JPY rebound after earlier weakness during the day. However, the pair’s gains remain limited as the Japanese Yen (JPY) continues to draw support from expectations of further monetary tightening by the Bank of Japan (BoJ). Data released in Japan earlier on Friday showed wage growth accelerating to 3.5% YoY in April, reinforcing expectations of another rate hike at the BoJ’s June 16 meeting.

In addition, Japanese authorities continue to maintain strong verbal pressure on the foreign exchange market. Japanese Finance Minister Satsuki Katayama reiterated on Friday that the government stands ready to take “decisive action” against excessive JPY volatility. Several analysts, including those at DBS and BNY, now view the 160.00 level as a potential trigger point for another round of foreign exchange intervention.

As a result, despite support from stronger-than-expected NFP data and a rebound in the US Dollar, USD/JPY remains in a highly sensitive area where the risk of official Japanese intervention could limit any sustained move above the 160.00 mark.

• EUR/GBP trades lower on Friday as Eurozone growth concerns weigh on the Euro.
• ECB faces a tougher policy trade-off as stagflation risks build.
• Markets are fully pricing in a 25 bps ECB rate hike at the June 11 policy meeting.

The Euro (EUR) slips against the British Pound (GBP) on Friday after a downward revision to Eurozone growth figures cast fresh doubt over the region's economic outlook. EUR/GBP trades around 0.8642 at the time of writing, pulling back after two days of gains.

Gross Domestic Product (GDP) fell 0.2% from the previous quarter, reversing the earlier estimate of 0.1% growth. The annual growth rate was revised down to 0.3% from 0.8%, slowing from 1.2% in the final quarter of 2025.

The weaker growth figures come as the Eurozone continues to grapple with higher energy costs following months of disruption to shipping through the Strait of Hormuz.

As a major importer of energy, the bloc has been particularly exposed to the surge in Oil prices triggered by tensions in the Middle East. Inflation has already accelerated above the European Central Bank’s (ECB) 2% target, and the latest GDP figures suggest the economic fallout is now becoming visible in growth data as well, raising the risk of stagflation.

That leaves the ECB facing a difficult balancing act. Markets are fully pricing in a rate increase at next week's policy meeting and expect at least two additional rate hikes before the end of the year.

However, signs of slowing growth alongside rising inflation are likely to complicate the policy outlook and could make it harder for the central bank to pursue an aggressive tightening cycle.

"A 25bp risk-dependent, pre-emptive, insurance hike is widely expected from the ECB next week despite rising concerns over the near-term growth outlook. The experience from the 2021-22 supply shock clearly runs deep as a faster response this time is preferred despite a lack of key wage data," Societe Generale economist Anatoli Annenkov said.

"While there is room for modest rate hikes without entering restrictive territory, the ECB is likely to insist on data-dependency going forward. It should also be open about the trade-offs of early action, especially as a strong adverse growth impact could hold back the wage reaction and even call for a policy reversal," he added.

Bob Savage at BNY notes that the Reserve Bank of India kept the repo rate at 5.25% and a neutral stance, while unveiling measures to support the Rupee and attract foreign capital. Authorities raised inflation and cut growth forecasts, and see potential USD 40–60 billion in inflows from tax exemptions and incentives for foreign bond investors and non‑resident Dollar deposits.

Policy steady with FX‑support tilt

"India’s central bank kept the policy repo rate unchanged at 5.25% and retained its neutral policy stance, citing heightened uncertainty from the Iran conflict and a deteriorating global environment."

"Alongside the decision, the government and RBI unveiled measures to support the rupee and attract foreign capital, including removing capital gains and interest taxes for foreign investors in government bonds, improving incentives for non-resident dollar deposits, and offering concessional foreign exchange swaps for overseas borrowing."

"Policymakers raised their inflation forecast for the current fiscal year to 5.1% from 4.6% and cut GDP growth expectations to 6.6% from 6.9%, reflecting higher oil prices and weaker external conditions."

"Authorities estimate the new measures could attract USD 40bn to 60bn in inflows and help offset pressure from capital outflows and a weaker currency."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Nonfarm Payrolls (NFP) in the United States (US) rose by 172K in May, the US Bureau of Labor Statistics (BLS) reported on Friday. This print followed the 179K increase (revised from 115K) recorded in April and surpassed the market expectation of 85K by a wide margin.

Other details of the publication showed that the Unemployment Rate remained unchanged at 4.3%, as anticipated, while the Labor Force Participation Rate held steady at 61.8%. Finally, annual wage inflation, as measured by the change in the Average Hourly Earnings, softened to 3.4% from 3.6% in April, matching analysts' estimates.

"The change in total nonfarm payroll employment for March was revised up by 29,000, from +185,000 to +214,000, and the change for April was revised up by 64,000, from +115,000 to +179,000," the BLS noted in its press release. "With these revisions, employment in March and April combined is 93,000 higher than previously reported."

Market reaction to Nonfarm Payrolls data

The US Dollar (USD) gathered strength with the immediate reaction to the upbeat employment data and the USD Index recovered from daily lows. At the time of press, the USD Index unchanged on the day at 99.40.

This section below was published as a preview of the US Nonfarm Payrolls (NFP) data at 04:00 GMT.

• Nonfarm Payrolls are expected to rise by 85K in May, slowing from the 115K gain seen in April.
• The Unemployment Rate is forecast to hold steady at 4.3%.
• US employment data could influence the Fed policy outlook and ramp up the US Dollar’s volatility.

The United States (US) Bureau of Labor Statistics (BLS) will release the Nonfarm Payrolls (NFP) data for May on Friday at 12:30 GMT. 

With Fed policymakers becoming more hawkish as the new Chairman Kevin Warsh takes the helm, investors will scrutinize the underlying details of the employment report to assess whether the Federal Reserve (Fed) will lean toward a tighter policy later in the year. 

US payrolls are among the most market-moving indicators. Still, this time, with all eyes on the inflation front, only a dismal print will be able to significantly hit the US Dollar.

What to expect from the Nonfarm Payrolls report?

Investors expect NFP to rise by 85K following the surprisingly strong 185K and 115K increases recorded in March and April, respectively. The Unemployment Rate is seen holding steady at 4.3%, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, is projected to soften to 3.4% from 3.6% in April.

Previewing the employment report, TD Securities analysts note that they expect NFP to register its lowest gain in three months at 60K in May.

“Gains will stem from the private sector, as we expect government jobs to be flat. We also anticipate the Unemployment Rate rate will edge higher for a second consecutive month to 4.4% [above the broader consensus of a stable 4.3%], assuming the participation rate stays largely unchanged. Average Hourly Earnings likely picked up 0.3% m/m (3.5% y/y),” they add.

Automatic Data Processing (ADP) reported earlier in the week that employment in the private sector rose by 122K in May. This print followed the 105K (revised from 109K) increase reported in April. 

"Hiring was more broad-based in May than we've seen in the last few years. The labor market continues to show sustained momentum going into the summer hiring season," said Nela Richardson, Chief Economist at ADP. 

Meanwhile, the Employment Index of the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) improved to 48.6 from 46.4 in April, while the Employment Index of the ISM Services PMI was virtually unchanged at 47.9. Still, with both readings remained in the contraction territory, contradicting the ADP’s findings. 

How will the US May Nonfarm Payrolls affect EUR/USD?

The US Dollar (USD) has been benefiting from the risk-averse market environment due to a prolonged crisis in the Middle East. Additionally, growing fears over high energy costs leading to persistently strong inflation have been paving the way for a hawkish Federal Reserve (Fed) policy pricing, further supporting the currency. 

After rising about 0.9% in May, the USD Index is up 0.5% so far in June, while markets see a nearly 60% probability of the US central bank raising the policy rate by 25 basis points (bps) at least once by the end of 2026, as per CME FedWatch Tool. 

Unless there is a significant downside surprise in the headline NFP print, policymakers are likely to focus on taming inflation without worrying about labor market conditions.

Dallas Fed President Lorie Logan said earlier this week that the labor market is stable and noted that inflation is taking too long to return to 2%. “I am increasingly concerned that higher interest rates could be necessary later this year,” Logan added. 

Similarly, New York Fed President John Williams stated that the job market is healthy and upside risks to inflation have increased. Furthermore, Cleveland Fed president Beth Hammack said that the Fed may need to act soon if inflation trends don’t cool and echoed the same sentiment about employment conditions, noting that “job market data point to stability.”  

Overall, Fed policymakers are largely tilting toward the hawkish side due to persistent inflation pressures and signs that the labor market is holding up well.

Following two consecutive months of robust readings, a figure above 50K could be seen as a “good enough” growth in NFP. In this scenario, the USD could gather strength heading into the weekend and cause EUR/USD to stretch lower.

At this point, only consecutive dismal NFP figures could sway policymakers’ view about the policy outlook. Hence, even if the NFP data comes in below 50K, any negative impact on the USD could remain short-lived. While EUR/USD could gain traction with the immediate reaction, a steady recovery could be difficult to come by.

In summary, the USD shouldn’t have a hard time staying resilient against its peers in the near future. 

A single disappointing NFP print might not be enough to shift the market conviction about a tighter Fed policy. Only a reopening of the Strait of Hormuz, whether by an extended ceasefire or a truce deal between the US and Iran, could trigger a deep correction in crude Oil prices and ease inflation concerns. In this market environment, this seems to be the only possible scenario in which the USD enters a bearish trend and opens the door to a decisive rally in EUR/USD. 

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“EUR/USD’s near-term technical outlook suggests that the bearish bias stays intact but lacks momentum. The Relative Strength Index (RSI) indicator on the daily chart remains slightly below 50 after testing 40 and the pair stays in the lower half of Bollinger Bands, while trading below all key Simple Moving Averages (SMA).”

“On the downside, 1.1580 (Fibonacci 61.8% retracement of the mid-March – Mid-April recovery) aligns as an interim support level before 1.1500 (Fibonacci 78.6% retracement) and 1.1415-1.1400 (static level, March 13 low).”

“Looking north, a strong resistance area could be spotted at the 1.1680-1.1700 region, where the 200-day SMA, 100-day SMA and the Fibonacci 38.2% retracement level align. In case EUR/USD stabilizes above this region, it might be able to attract technical buyers and target 1.1750 (Fibonacci 23.6% retracement) ahead of 1.1800 (static level, round level).”

• The Unemployment Rate in Canada dropped to 6.6% in May.
• USD/CAD flirts with the 1.3860 zone in the wake of the release.

Statistics Canada reported on Friday that the Unemployment Rate decreased to 6.6% in May, below what markets were expecting.

Additionally, the Net Change in Employment increased by 87.8K jobs, sharply reversing the 17.7K drop we saw in the prior month. In addition, the participation rate held steady at 65%, and wages are growing at a 3.2% annual pace, down from April’s 4.8% annual gain.

In the wake of the release, the Canadian Dollar (CAD) maintains a positive bias, with USD/CAD facing some downside pressure and revisiting the 1.3870 region, correcting from Thursday’s two-month tops near 1.3930.

This section below was published as a preview of the Canadian labour market report at 08:00 GMT.

• The Canadian Unemployment Rate is seen holding steady in May.
• The BoC is expected to hold its hand at its June 10 meeting.
• The Canadian Dollar is losing ground vs the Greenback this month.

Statistics Canada will release its Labour Force Survey on Friday, and markets are bracing for quite a steady print. The Unemployment Rate is expected to remain at 6.9% in May, while the Net Change in Employment is forecast to increase by 10K, reversing April’s 17.7K drop.

Despite the report's tone, the bar for the Bank of Canada (BoC) to change its policy direction should remain pretty high. Indeed, the central bank is expected to keep its policy unchanged at its June 10 gathering, following four consecutive ‘on hold’ decisions.

At its latest event, the BoC signalled an upbeat medium-term outlook for economic growth while revising inflation higher for the current year. In addition, Governor Tiff Macklem delivered a cautious message at his press conference, keeping the data-dependent stance well in place while allowing for higher rates if energy prices remain elevated.

So far, market participants expect around 34 basis points of tightening by the central bank by year-end.

What can we expect from the next Canadian jobs report?

Consensus among analysts sees Canada’s Unemployment Rate at 6.9% last month. Additionally, investors forecast the economy will add around 10K jobs in May, surpassing the 17.7K loss recorded in the prior month. It is worth recalling that Average Hourly Wages rose at an annualised 4.8% in April (from 4.7%), pointing to sticky wage inflation.

When is the Canada Unemployment Rate released, and how could it affect USD/CAD?

All eyes in Canada will be on Friday’s release of the jobs report, due at 12:30 GMT. A stronger print could give the Canadian Dollar (CAD) a quick lift, but don’t expect fireworks.

USD/CAD has been on a steady uptrend since the beginning of May, almost entirely to the tune of developments in the Middle East and dynamics around its North American peer.

Pablo Piovano, Senior Analyst at FXStreet, points out that USD/CAD has been edging higher over the last few weeks, hitting fresh two-month tops north of 1.3900 the figure on June 4. The surpass of the latter could prompt spot to embark on a potential trip toward the 2026 ceiling of 1.3966 recorded on March 31. So far, the constructive outlook is expected to remain intact while above the 200-day SMA around 1.3810.

On the other hand, he highlights minor support at the weekly floor of 1.3770 (May 29), seconded by the provisional 55-day and 100-day SMAs at 1.3761 and 1.3719, respectively. Down from here emerges the May bottom at 1.3549 (May 1), closely followed by the March base at 1.3525 (March 9), the February trough at 1.3504 (February 11) and the 2026 valley at 1.3481 (January 30).

“Momentum favours extra gains, with caution,” he adds, noting that the Relative Strength Index (RSI) is flirting with the overbought region past the 69 level, and the Average Directional Index (ADX) just over 25 suggests the underlying trend appears to be gathering traction.