Dollar regained momentum today as two important market narratives moved in its favor simultaneously. First, investors became increasingly skeptical that a US-Iran agreement would be reached quickly, pushing oil prices higher again. Second, stronger-than-expected US employment data reinforced confidence in the economy and strengthened the case for maintaining restrictive monetary policy. Together, those developments helped lift the Dollar broadly across the foreign exchange market.
The biggest shift came from the geopolitical front. Brent crude climbed through $98 as traders reassessed the likelihood of a near-term diplomatic breakthrough. While US President Donald Trump said Iran had agreed not to possess nuclear weapons, he also warned that the country could still reverse its position. Meanwhile, hostilities continued to flare in the Gulf region, with attacks in Kuwait highlighting the fragile security environment. Markets appear to be pricing not an immediate escalation, but a prolonged period of uncertainty that keeps a risk premium embedded in energy prices and sustains inflation concerns.
The second pillar of Dollar strength came from the labor market. ADP private employment increased by 122k in May, beating expectations and indicating hiring remains healthy. Wage growth also remained elevated, suggesting underlying inflation pressures have not faded. The report reinforces the view that the Fed does not need to worry about labor-market weakness and can remain focused on inflation risks. Markets now see around a 60% probability of a Fed rate hike by the end of the year, a figure that could rise further if oil prices stay elevated at current or even higher levels.
Adding to the inflation story was a new trade development. The Office of the U.S. Trade Representative proposed additional tariffs of up to 12.5% on imports from 60 economies, including China, the European Union, and Japan. If implemented, the measures would add another source of upward pressure on import costs at a time when energy-driven inflation risks are already increasing.
Against this backdrop, the divergence between the US and Eurozone remains a key driver in currency markets. While the ECB is expected to raise rates next week, weak PMI surveys suggest recession risks are rising. The Fed, by contrast, faces an economy that continues to generate jobs and absorb higher interest rates. That difference in growth dynamics is helping preserve the Dollar’s yield advantage.
Among major currencies, Dollar emerged as the strongest performer of the day so far. Yen ranked second as intervention warnings from Japan slowed the advance in USD/JPY, while Canadian Dollar benefited from the rebound in crude oil. Commodity-linked currencies such as Aussie and Kiwi struggled alongside Swiss Franc as markets shifted toward a more defensive posture. The combination of rising oil, resilient US data, and fading hopes for a quick Iran deal is increasingly becoming a powerful Dollar story.
US ADP Employment Tops Forecasts With 122k Growth as Hiring Broadens Across Industries
The US labor market continues to show surprising resilience. ADP reported stronger-than-expected hiring in May, with job gains spread across industries and business sizes. Combined with steady wage growth, the report suggests the economy is entering the summer with solid employment momentum ahead of Friday’s crucial payrolls release. Read More.
Market Heard Japan’s Intervention Warning. But USD/JPY 160 Test Still Alive.
Tokyo fired another warning shot at currency markets and the Yen bounced, but the reaction was remarkably limited. USD/JPY remains near 160, suggesting traders are still willing to challenge Japan’s intervention line. With a BoJ hike largely priced in, attention is shifting to Friday’s US jobs report, which could determine whether the next move is a retreat from 160 or a direct assault on it. Read More.
Eurozone PPI Jumps 0.6% mom, 4.9% yoy as Pipeline Inflation Pressures Build
Another inflation report, another problem for the ECB. Eurozone producer inflation accelerated more than expected in April, with intermediate goods prices posting the strongest monthly increase. The data suggest cost pressures are continuing to move through supply chains, reinforcing the case for a June rate hike even as growth indicators weaken. Read More.
Eurozone PMI Signals 4% Inflation and GDP Contraction. ECB Faces Tough Choice.
The ECB’s inflation problem is getting worse just as its growth problem deepens. Eurozone PMI data now point to a possible GDP contraction in the second quarter, while price indicators suggest inflation could approach 4% in coming months. The result is an increasingly uncomfortable dilemma for policymakers heading into next week’s meeting. Read More.
UK Services PMI Finalized Below 50 as Inflation and Geopolitics Hurt Confidence
The UK economy lost momentum sharply in May as the services sector slipped into contraction for the first time in more than a year. Businesses cited weaker demand, rising fuel and transportation costs, and growing uncertainty linked to the Middle East conflict. With inflation pressures still running at levels not seen since the 2022 energy crisis, the Bank of England faces an increasingly difficult balancing act. Read More
Bitcoin’s Next Stop Could Be $60k. The Bigger Risk May Be $40k.
Bitcoin is facing pressure from both fundamentals and flows. Elevated oil prices are reinforcing higher-for-longer rate fears, while ETF redemptions are creating a steady stream of forced selling. The result is a technical breakdown that could have much further to run. Read More.
Australia Q1 GDP Grows 0.3% qoq, Misses Forecasts as Exports and Mining Drag Growth
Australia’s economy started 2026 on a softer footing than expected. Exports recorded their biggest quarterly decline in two years as cyclone disruptions hit mining and trade, while government spending also slowed. A surge in data-centre investment provided a bright spot, but not enough to prevent GDP growth from missing forecasts. Read More.
Japan’s PMI Services Stagnates While Cost Pressures Surge
Japan’s economy is starting to feel the impact of the Middle East conflict. Services activity stagnated for the first time in over a year as rising prices squeezed household budgets, while businesses faced near-record cost pressures. Manufacturing is still supporting growth, but much of that strength appears linked to precautionary stockpiling rather than underlying demand. Read More.
EUR/USD Daily Outlook
Intraday bias in EUR/USD stays neutral as range trading continues. On the downside, break of 1.1575 support will resume the fall from 1.1848 to retest 1.1408 low. Above 1.1865 will target 1.1795 resistance. Firm break there will argue that rise from 1.1408 is ready to resume through 1.1848.
In the bigger picture, the strong support from 38.2% retracement of 1.0176 to 1.2081 at 1.1353 suggests that the pullback from 1.2081 is more likely a corrective move. Strong support was also found in 55 W EMA (now at 1.1542). Focus is back on 1.2 key cluster resistance level. Decisive break there will carry long term bullish implications. Nevertheless, break of 1.1408 support will revive the case of medium term bearish trend reversal.
