Jobs Data Strengthens, Markets Defensive (11-15 May)

Strong US payrolls reinforced confidence in the broader economy, yet tensions around the Strait of Hormuz continued to shape sentiment across currencies, commodities, and bond markets.

The dollar weakened despite solid labor figures, gold and silver extended gains, and oil remained highly sensitive to every development tied to the fragile US-Iran ceasefire.

Expectations for further tightening from major central banks stayed firmly in focus as inflation risks linked to energy prices persisted.

Currencies

Dollar Index: The US dollar index fell below 98 on Friday, reaching a ten-week low despite strong US labor data. April non-farm payrolls rose by 115,000 versus forecasts of 62,000, while unemployment held at 4.3%. The Fed might remain cautious as higher energy prices keep inflation risks high. Donald Trump stated that the Iran ceasefire remains in place, though tensions around the Strait of Hormuz continue.
Euro: The euro climbed above $1.175, its highest level since April, supported by easing concerns around the Iran conflict and expectations of tighter ECB policy. Sentiment was also a key factor in trade friction after Donald Trump warned the EU about potential tariff increases. ECB President Christine Lagarde added support by signaling the bank is prepared to respond quickly if needed.
British Pound: The pound rose above $1.36, reaching its strongest level since mid-February, as UK political developments were viewed as manageable despite Labour Party losses in local elections. Markets also followed gains by Nigel Farage’s Reform UK while waiting for additional results. Improving sentiment around Iran reduced some inflation concerns and supported expectations of further Bank of England tightening later this year.
Japanese Yen: The yen traded near 157 per dollar and remained mostly steady through the week as intervention warnings from Japanese authorities failed to generate lasting momentum. Officials repeated that intervention remains possible, although no action has been confirmed. A third straight monthly increase in real wages also strengthened expectations for additional Bank of Japan tightening. Continued tensions near the Strait of Hormuz, alongside dollar strength, limited further gains in the yen.

Commodities

Gold Heads for Strong Weekly Gain

Gold climbed above $4,720 per ounce, reaching its highest level since April 22 and heading for a weekly gain of over 2%. Improving sentiment around a possible US-Iran peace agreement supported demand, while easing inflation concerns reduced expectations for prolonged high interest rates. Despite brief clashes, Iran stated that conditions had stabilized, and Donald Trump confirmed the ceasefire remains in place. Strong US labor data also reinforced confidence in the broader economic outlook.

Hormuz Clashes Keep Oil on Edge

Brent crude futures rose 1.2% to around $101 per barrel on Friday, although prices remained down roughly 6% for the week. Renewed clashes between the US and Iran kept markets focused on supply risks in the Strait of Hormuz, where tensions have disrupted crude flows since late February. Iran accused the US of breaching the ceasefire, while Washington reported strikes on Iranian targets after attacks on US warships. Donald Trump said the ceasefire still holds as markets continue to balance diplomatic developments against escalation risks.

Silver Posts Strongest Week Since March

Silver rose above $80 per ounce, heading for a weekly gain of more than 7%. Easing geopolitical tensions improved sentiment and reduced concerns that inflation would keep rates high for longer. Iran said conditions had stabilized despite recent clashes, while Donald Trump confirmed the ceasefire remains active. Strong US jobs data, with payrolls rising by 115,000 against expectations of 62,000, also supported confidence across markets.

Fixed Income

US 10-Year Treasury Yield: The US 10-year Treasury yield fell to 4.35%, near two-week lows, as Middle East tensions continued to shape sentiment. Uncertainty around a possible US-Iran agreement remained in focus despite Donald Trump confirming the ceasefire is still active. Strong US jobs data contrasted with softer consumer sentiment, reinforcing expectations that the Fed may keep rates steady for longer.
UK 10-Year Gilt Yield: UK 10-year gilt yields eased to 4.85%, their lowest level since April 20, supported by softer global risk sentiment and demand for government debt. Political developments in the UK remained in focus after Labour’s local election losses and gains by Reform UK. Improving expectations around a US-Iran deal also helped reduce inflation concerns, although markets still price in two Bank of England rate hikes by year-end.
Japan 10-Year Government Bond Yield: Japan’s 10-year yield climbed toward 2.48% as renewed tensions near the Strait of Hormuz revived inflation concerns and increased risk aversion. In Japan, a third consecutive rise in real wages strengthened expectations that the Bank of Japan may continue tightening policy if inflation pressures persist.
Germany 10-Year Bund Yield: Germany’s 10-year Bund yield slipped below 3% as easing geopolitical tensions supported bond markets and reduced inflation concerns. Optimism around a possible US-Iran agreement improved sentiment, while markets continued to price in at least two ECB rate hikes after Christine Lagarde reaffirmed the bank’s readiness to act if needed.

Economic Data

US Unemployment Rate

The US unemployment rate held steady at 4.3% in April, in line with expectations, though broader labor indicators weakened. The number of unemployed rose by 134,000 to 7.37 million, while total employment fell by 226,000. Labor force participation slipped to 61.8%, its lowest level since October 2021, and the broader U-6 unemployment rate climbed to 8.2%, pointing to rising underemployment pressures.

US Job Openings

US job openings fell by 56,000 to 6.866 million in March, slightly above expectations. Gains in finance and insurance partly offset declines in professional and business services. Hiring rose to 5.6 million, while quits and layoffs remained broadly stable, signaling a labor market that is slowing gradually rather than weakening sharply.

China Trade Balance

China’s trade surplus narrowed to $84.82 billion in April from $95.85 billion a year earlier, although the figure still exceeded forecasts. Exports surged 14.1% to a record $359.44 billion, while imports jumped 25.3% to $274.62 billion. For the first four months of the year, the surplus declined to $347.70 billion as imports continued to outpace export growth.

US Nonfarm Payrolls

The US economy added 115,000 jobs in April, well above expectations of 62,000, following a revised 185,000 increase in March. Hiring was led by health care, transportation, warehousing, and retail trade, while manufacturing and federal government employment declined. The data pointed to a labor market that is cooling but still showing resilience.

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