Stronger-than-expected US labor figures could extend the Dollar’s rally as Fed tightening risks persist amid stable employment and inflation.
The US Dollar remains near the top of its recent trading range, supported by stable labor market data and rising inflation pressures. Markets are focused on today’s Nonfarm Payrolls report, with a consensus print of 88k jobs expected to keep the Dollar well-supported.
The 2-year US Treasury yield has risen 21bps since early May, while Germany’s equivalent yield is up just 2bps. This divergence leaves EUR/USD exposed to a stronger US employment report, as European rate expectations are already priced in.
Geopolitical tensions and potential oil price spikes further skew risks toward a stronger Dollar, with the DXY index at its highest level since April 8.