- Strong U.S. employment numbers were not enough to prevent the dollar from falling.
- Geopolitics and risk appetite remain the key factors.
They came under pressure from sellers on Friday and a strong labor market report failed to reverse the trend, simply slowing the pace of the decline. increased by 115,000 in April, almost doubling expectations thanks to strong hiring in the private sector (+123,000). it remained at 4.3%. Although wage growth accelerated from 3.4% year-on-year to 3.6%, it was below the forecast of 3.8%. The labor market shows no signs of crisis.
Strong economic data has pushed futures markets to increase the probability of monetary policy tightening in 2026 from 14% to 21%. Meanwhile, expectations for a rate cut have fallen from 12% to just 6%. Normally this would support the US dollar, but the market seems to be focused elsewhere.
One of the reasons is the lower demand for the dollar as a safe haven asset.
Investors continued to buy into the , boosting demand for U.S. assets and creating a “Goldilocks”-style environment, where economic growth slows but remains resilient enough to support risk appetite. At the same time, markets were also closely following the negotiations between Washington and Tehran.
To the disappointment of the markets, Iran rejected the American proposals and presented its own conditions. Donald Trump considers them completely unacceptable and intends to resume Operation Inherent Resolve. A week earlier, it provoked the wrath of Tehran and an escalation of the geopolitical conflict. Now history risks repeating itself. Furthermore, the escalating situation in the Middle East will boost demand for the US dollar as a safe haven asset.
That said, there is still a glimmer of hope for a peaceful solution to the conflict. Neither Washington nor Tehran have yet announced that talks will not take place. Furthermore, there is a possibility that the meeting between Donald Trump and Xi Jinping will be followed by pressure on Iran; at least, psychological pressure.
Rising prices and fears of an acceleration in US inflation in April forced a step back after several days of gains. As long as consumer prices remain high, central banks, led by the Federal Reserve, will continue to consider raising interest rates. Under such conditions, the non-interest-bearing precious metal is in an awkward situation.
The FxPro Analyst Team
