Markets React to Strong U.S. Jobs Data (9–13 June)

The U.S. dollar index rose over 0.4% to above 99.1 following May's stronger jobs report, which showed 139,000 new jobs versus the 126,000 forecast. Wages increased by 0.4%, beating expectations, while the unemployment rate held at 4.2%. However, a downward revision to April's data limited broader optimism, and the dollar remained slightly down for the week amid concerns over slowing growth and policy uncertainty.

In Europe, the euro dropped below $1.14 after the European Central Bank cut rates by 25 basis points and lowered inflation forecasts. ECB President Lagarde suggested that the easing cycle may be nearing its end. Policymaker Stournaras noted the eurozone had likely achieved a soft landing.

The British pound rose to $1.355, close to a three-year high, supported by positive UK economic data and the announcement of a £15 billion defense plan under the AUKUS agreement. UK manufacturing contracted less than expected, and annual house prices increased by 3.5%.

The Japanese yen weakened toward 144 per dollar as traders awaited U.S. labor data and processed soft household spending figures from Japan. Bank of Japan Governor Ueda reiterated that rate hikes remain possible if economic forecasts are met.

ISM Manufacturing PMI (May)

The U.S. ISM Manufacturing PMI declined to 48.5 in May from 48.7 in April, falling short of the 49.5 estimate. This marks the third consecutive month of contraction and the most significant drop since November 2024. Output, new orders, employment, and backlogs all fell, though moderately. Export sales saw a steeper decline. Inventories slipped back into contraction after temporary gains from early tariff-related purchases, while supplier deliveries continued to be delayed due to port congestion. Prices remained elevated despite a slight deceleration.

Eurozone CPI (YoY, May)

Annual inflation in the eurozone eased to 1.9% in May from 2.2% in April, below the 2.0% forecast and beneath the ECB’s target for the first time since September 2024. The decrease was primarily driven by a slowdown in services inflation, which fell to 3.2% from 4.0%. Energy prices dropped by 3.6%, while food, alcohol, and tobacco inflation rose to 3.3%. Inflation in industrial goods held steady at 0.6%, and core inflation slowed to 2.3%, the lowest since January 2022. The figures support expectations for further policy easing.

ADP Nonfarm Employment Change (May)

Private sector employment in the U.S. increased by 37,000 in May, marking the weakest monthly gain since March 2023 and well below the 115,000 projection. The services sector added 36,000 jobs, mainly in hospitality and finance, while declines occurred in professional services, education, and trade. The goods-producing sector lost 2,000 jobs, mostly in mining and manufacturing, partially offset by a 6,000-job gain in construction. Wage growth remained solid, with job-stayers earning 4.5% more and job-changers 7%, unchanged from April.

ISM Non-Manufacturing PMI (May)

The ISM Services PMI dropped to 49.9 in May from 51.6 in April, reflecting the first contraction since June 2024 and falling below the 52 forecast. New orders, inventories, and backlogs all declined, while production was unchanged. Price pressures rose to their highest level since late 2022, likely driven by tariffs. Supplier delivery times increased, though employment showed signs of recovery. Survey responses indicated that many companies are delaying purchases due to tariff-related uncertainty.

Bank of Canada Interest Rate Decision (June)

The Bank of Canada maintained its benchmark interest rate at 2.75% in June, pausing after cumulative rate cuts totaling 2.25 percentage points. The decision reflects caution due to persistent U.S. tariffs and uncertain trade developments. The central bank cited potential risks to Canadian exports and inflation outlook as key reasons for holding rates steady.

European Central Bank Interest Rate Decision (June)

As widely anticipated, the European Central Bank reduced its deposit facility rate by 25 basis points to 2.0%, aiming to support economic growth amid declining inflation and growing trade uncertainty.

Average Hourly Earnings (May)

U.S. average hourly earnings increased by 0.4% in May to $36.24, exceeding the 0.3% expectation and doubling April’s monthly pace. Gains were consistent across production and nonsupervisory roles. On an annual basis, wage growth remained at 3.9%, above the projected 3.7%.

Nonfarm Payrolls (May)

The U.S. economy added 139,000 jobs in May, slightly above forecasts but down from the revised 147,000 in April. Healthcare, hospitality, and social assistance were the main contributors to job gains. Manufacturing lost 8,000 positions, while the federal government cut 22,000 jobs. Combined revisions to March and April resulted in 95,000 fewer jobs than initially reported. Despite the adjustments, the labor market remains stable, although ongoing policy shifts may add pressure.

Unemployment Rate (May)

The unemployment rate held steady at 4.2% in May, matching expectations. The labor force declined, with 696,000 fewer individuals employed and 71,000 more unemployed. The participation rate slipped to 62.4%, its lowest since February, while the broader U-6 unemployment rate remained unchanged at 7.8%.

Currencies

The U.S. dollar index gained over 0.4% to trade above 99.1, following strong May jobs data showing 139,000 new jobs, 0.4% wage growth, and a stable 4.2% unemployment rate. Despite this, broader economic concerns kept the weekly performance slightly negative.

The euro fell below $1.14 as a result of strong U.S. data and a 25 basis point ECB rate cut. President Lagarde signaled limited room for further cuts.

The British pound rose to $1.355, close to a three-year high, supported by positive UK data and a £15 billion defense investment under AUKUS.

The Japanese yen weakened toward 144, weighed down by soft domestic spending and anticipation of U.S. labor data. A phone call between Trump and Xi hinted at a potential revival of trade talks, though without concrete outcomes. BOJ Governor Ueda confirmed that rate hikes remain an option if warranted.

Commodities

Gold futures slipped below $3,350 per ounce on Friday following the strong U.S. jobs report, which eased concerns about a sharp labor market slowdown. May saw 139,000 jobs added, beating the 130,000 estimate, while April’s figure was revised to 147,000. Unemployment remained at 4.2%, and wages increased 3.9% year-over-year. Despite pulling back, gold ended the week around 2% higher, supported by safe-haven demand after Trump announced a 50% tariff on steel and aluminum.

WTI crude oil rose above $64 per barrel, supported by strong U.S. jobs figures, improving U.S.-China trade signals, and Canadian wildfire disruptions affecting roughly 7% of national output. Rainfall has since eased the impact. Saudi Arabia also proposed an OPEC+ output increase of at least 411,000 barrels per day starting in August. Oil was set for a 6% weekly gain.

Silver prices surged past $36 per ounce, the highest level since February 2012. The rally was fueled by tight supply, strong industrial demand, particularly in solar and electronics, and technical momentum. Industrial use accounts for over half of global silver demand. The market faces its fifth consecutive annual deficit, though the Silver Institute expects this to narrow by 21% in 2025.

Expectations of a Fed rate cut also lent support to silver, following a string of soft U.S. data including higher jobless claims, slower hiring, and a contraction in the services sector. However, the strong payroll data in May has kept the Fed's next move uncertain.

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