Dollar Falls on Soft US Jobs Data, Fueling Rate‑Hike Uncertainty

The dollar index slipped to a two‑week low, dropping 0.68 %. The decline was driven by a weaker‑than‑expected June U.S. payroll report, which reduced expectations of an imminent Fed rate hike. Oil prices also weakened, with WTI falling to a 4.25‑month low, easing inflation concerns and adding to dovish sentiment. The currency regained modest support after jobless claims fell unexpectedly, and May factory orders were less severe than forecast.

June non‑farm payrolls increased by 57 000, below analysts’ forecast of 113 000, while May figures were revised down to 129 000 from the previously reported 172 000. The June unemployment rate fell 0.1 percentage point to a one‑year low of 4.2 %, outperforming the expected unchanged reading of 4.3 %.

January average hourly earnings climbed 0.3 % month‑over‑month and 3.5 % year‑over‑year, in line with expectations.

Initial jobless claims dipped by 1 000 to 215 000, indicating a stronger labor market than the anticipated rise to 218 000.

May factory orders slipped 1.3 % month‑over‑month, a milder drop than the projected 2.0 %. Ex‑transportation orders, however, surged 1.9 % month‑over‑month, the largest rise in over four years and above analyst expectations of 1.0 %.

Swap spreads imply a 20 % probability of a 25‑basis‑point Fed rate increase at the forthcoming July 28–29 FOMC meeting.

The euro‑dollar pair rose to a 1.5‑week high, up 0.61 %. The currency gained on the backdrop of the weak June U.S. payroll data that pressured the dollar, and benefitted from Eurozone news, including Italy’s unemployment rate slipping to a record low – a factor that could encourage ECB tightening.

Italy’s May unemployment rate edged down 0.1 percentage point to a 2004 record low of 5.0 %, outperforming the expected unchanged reading of 5.1 %.

Markets assign a 3 % probability that the ECB will raise rates by 25 basis points at its July 23 meeting.

The yen weakened 0.97 % against the dollar, climbing to a two‑week high. A Reuters report suggesting possible Japanese intervention fed speculation, while a rise in 10‑year JGB yields to a five‑week high of 2.787 % strengthened the yen’s interest‑rate differential. The currency gained further as U.S. Treasury yields fell after the weak June payroll data.

Reuters noted that Japan’s Ministry of Finance may cease signalling intentions to the market and might intervene abruptly to neutralise speculative yen positions, thereby supporting the currency.

Intervention risk has risen after Finance Minister Satsuki Katayama met Treasury Secretary Scott Bessent, and the two agreed to take “bold” actions if necessary, signalling growing alignment on currency policy. With the yen already above 160 per dollar at a 39‑year low, past interventions at that threshold lend weight to the possibility of support.

Market pricing implies a 2 % probability that the Bank of Japan will raise rates by 25 basis points at its July 31 meeting.

COMEX gold surged 1.48 % to $1,060.60, while silver rose 2.60 % to $1.574.

Metal prices hit week‑highs, buoyed by the dollar’s two‑week low. The softer June payroll data also dampened expectations of Fed tightening, which supports precious metals. Additionally, a decline in WTI crude to a 4.25‑month low has lowered inflation expectations and may encourage central banks globally to ease policy, further favoring gold and silver.

Recent fund withdrawals have weighed on metals; long positions in gold ETFs dipped to a nine‑month low, and silver ETF long holdings fell to an 11.25‑month low, following multi‑year highs recorded earlier this year.

Demand from central banks has bolstered gold. China’s People’s Bank of China increased its gold holdings by 320,000 ounces in May to 74.96 million troy ounces – the highest monthly rise in 17 months and the nineteenth straight month of growth.

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