On Friday, the U.S. dollar index (DXY) surged to a 1.75-month high, closing up +0.66% following a stronger-than-expected U.S. payroll report for May, which showed an increase of +172,000 jobs compared to expectations of +88,000. The unemployment rate remained unchanged at 4.3%. Additionally, the report has heightened speculation about a potential interest rate hike by the Federal Reserve during its next meeting on June 16-17, with swap markets pricing in a 1% chance of a +25 basis point increase.
In Europe, the EUR/USD fell to a 1.75-month low, down -0.78%, influenced by a downward revision of Eurozone Q1 GDP to -0.2% quarter-over-quarter. The market anticipates a +25 basis point rate hike from the European Central Bank at its upcoming June 11 meeting. Meanwhile, the Japanese yen fell to a 5-week low against the dollar as T-note yields rose, despite better-than-expected domestic economic reports.
Precious metals saw a sharp decline, with gold dropping -3.10% and silver falling -6.68%, as higher dollar strength and rising bond yields applied downward pressure. The Bank of Japan is also expected to consider a +25 basis point rate hike, with a 94% probability noted by market analysts.
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