The Dollar Index extended its decline for a fifth consecutive session, reaching 103.7, its lowest level in four months, as tariff uncertainty and economic concerns weighed on sentiment. Traders now focus on the upcoming jobs report for insights into the labor market.
The Euro surged above $1.085, hitting its highest level since November 5 and marking a 4.6% weekly gain, the strongest since 2009. The rally was driven by Germany’s fiscal reforms, a cautious ECB, and a weakening dollar.
The Yen strengthened beyond 148 per dollar, reaching a five-month high, supported by safe-haven demand and growing expectations of BOJ rate hikes. Deputy Governor Uchida’s comments signaling a gradual exit from monetary easing further supported the currency.
The British Pound climbed above $1.28, its highest since November 12, benefiting from a softer dollar and expectations of prolonged UK rate hikes. Optimism surrounding a potential US trade deal and increased UK defense spending also supported Sterling’s advance.
Bond markets experienced heightened volatility this week. Germany’s 10-year yield surged 20% after a debt ceiling increase, while U.S. Treasury yields edged 1.5% higher. Japan’s 10-year yield reached 1.55%, its highest level in 15 years.
Eurozone inflation eased to 2.4% from 2.5% in January, slightly surpassing the 2.3% forecast. Service inflation moderated to 3.7% from 3.9%, while unprocessed food prices surged to 3.1% from 1.4%. Core inflation dipped to 2.6%, marking its lowest level since January 2022.
The index advanced to 52.7, its strongest level since June 2022, surpassing the 51.6 estimate. Growth was fueled by preemptive purchases ahead of tariffs, leading to increased output and new orders. Input and output price inflation surged to multi-year highs.
Climbing to 52.7 from 51.2, the index reflected the fastest expansion since June 2022. Production and new orders accelerated as firms stocked up ahead of tariffs, though hiring slowed. Inflationary pressures rose, with input costs reaching their highest level since November 2022.
Private sector payrolls expanded by 77K, the weakest gain in seven months, missing the 140K forecast. The service sector added just 36K jobs, with losses in trade, education, and IT, while the goods sector saw a 42K increase, driven by construction and manufacturing.
The index retreated to 51.0 from 52.9, below the 53.0 forecast, though revised up from an initial estimate of 49.7. Business activity slowed due to policy uncertainty and tariffs, prompting the first job cuts in three months. Export demand declined for a second consecutive month.
The services index climbed to 53.5 from 52.8, exceeding expectations. Business activity and new orders expanded for a third month, while inventories improved. Inflation concerns persisted, with price pressures rising to 62.6 from 60.4.
The ECB lowered its deposit rate by 25 basis points to 2.5%, marking its fifth consecutive cut, bringing borrowing costs to their lowest level since February 2023.
U.S. jobless claims dropped by 21K to 221K, while insured unemployment rose by 42K to 1.9M. The four-week moving average edged up to 1.87M.
U.S. wages increased by 0.3%, reaching $35.93, in line with expectations, following a 0.4% gain in January. On a yearly basis, earnings advanced by 4.0%.
The U.S. economy added 151K jobs, an improvement from 125K in January but below the 160K forecast. The healthcare, finance, and social assistance sectors led the gains, while government jobs declined by 10K.
The jobless rate edged up to 4.1% from 4.0%, with 203K more unemployed and 588K fewer employed. The labor force participation rate slipped to 62.4%.
The Dollar Index (DXY) fell for the fifth straight session to 103.7, its lowest level in four months, as tariff uncertainty continued to weigh on sentiment. Although Trump suspended North American tariffs, trade policy uncertainty persisted. The euro surged past $1.085, heading for its best weekly gain since 2009, fueled by Germany’s fiscal reforms and ECB easing. The yen strengthened above 148 per dollar, hitting a five-month high on safe-haven demand and BOJ rate hike expectations. The pound climbed above $1.28, benefiting from a weaker dollar, stable UK interest rates, and optimism over potential U.S.-UK trade deals.
Gold approached record highs, supported by uncertainty surrounding U.S. trade policies and safe-haven demand. Despite Trump suspending most North American tariffs, Canada maintained retaliatory duties, and China is set to implement countermeasures next week. Silver surged past $32 per ounce, benefiting from a weaker dollar and renewed trade tensions. Meanwhile, the U.S. imposed additional tariffs on Canada, Mexico, and China, prompting retaliatory measures from both Canada and China.
U.S. equities posted a volatile week, with major indices closing lower. The S&P 500 and Nasdaq fell by 3%, while the Dow declined by 2.8%. Nvidia tumbled 18%, dragging down other tech giants like Amazon, Netflix, and Meta, which dropped 8% each. However, Microsoft, Google, and Apple remained flat, showing relative resilience amid the broader market selloff.
Markets opened Tuesday with a cautious tone as traders reviewed the recent US-China trade agreement and awaited key US inflation data.
Detail Dollar Gains on U.S.-China Deal Optimism, Gold and Euro Slip (05.12.2025)The U.S. dollar strengthened on Monday following positive signals from U.S.-China trade talks in Geneva, pressuring the euro to near $1.1240 and the pound to $1.3275. The yen weakened to a one-month low past 146 as safe-haven demand faded.
Detail
Fed Holds Rates and Trade Hopes Lift Sentiment (12 - 16 May)The dollar index dipped to 100 on Friday but posted a third weekly gain, supported by the Fed’s steady policy and Trump’s upbeat trade tone. The euro held at $1.13 as traders eyed ECB cuts by year-end. The pound steadied near $1.33 after a limited US-UK trade deal. The yen weakened past 145 on stronger dollar demand and improved global trade sentiment.
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