Stocks Flat but Dollar Rises After Data – USD up 0.4%
US stock markets closed relatively flat yesterday as a stronger-than-expected jobs report was offset by ongoing concerns over the Middle East conflict, which continued to weigh on sentiment. The Dow finished up just 0.09%, the S&P 500 edged higher by 0.01%, and the Nasdaq closed with a modest 0.08% gain as investors digested the latest developments. In contrast, both the US dollar and Treasury yields moved higher following the ADP data, which surpassed expectations. The 2-year yield rose by 1.4 basis points to 3.635%, while the benchmark 10-year yield climbed 4.4 basis points to 3.783%. The dollar index (DXY) added 0.42%, with USD/JPY being a notable mover.
Oil prices also increased as tensions in the Middle East overshadowed a higher-than-expected US inventory number. Brent rose 0.46% to $73.90 per barrel, and WTI gained 0.39% to settle at $70.10 per barrel. Meanwhile, gold prices dipped slightly, closing the New York session at $2,657.14.
Dollar Back in Favour This Week – Up 1.5%
The US dollar has surged this week, rising nearly 1.5% on the dollar index as a combination of factors supported its strength. Positive economic data, safe-haven flows, and geopolitical concerns have contributed to the greenback’s renewed appeal. Traders are now eyeing potential further gains ahead of key US employment data later this week. The escalating conflict in the Middle East has driven haven demand for the dollar, while stronger-than-expected jobs data – including the JOLTS Job Openings and ADP Non-Farm Employment numbers – have also bolstered its position.
Additionally, a surprising shift in stance from Japan’s new Prime Minister, who has pivoted from a hawkish to a more dovish approach in recent days, has led to USD/JPY gaining nearly 3.8% since Monday’s low. With five trading sessions to go before the release of US employment data, stronger-than-expected results could reduce expectations of a rate cut and fuel another rally for the dollar.
Middle East in Focus, but More Data to Come Today
While the escalating conflict in the Middle East remains a primary concern for traders, there is a significant amount of economic data on the horizon that could drive markets. The Asian session has little on the event calendar, but attention will shift to Switzerland at the European open with the release of the latest CPI data. Expectations are for a 0.1% month-on-month decline, and any deviation from this forecast, particularly if inflation is higher, could lead to significant market moves.
In the US, weekly unemployment claims are due out early in the session, and another strong print could further heighten expectations for tomorrow’s Non-Farm Payrolls (NFP) report. Later in the day, the ISM Services PMI figures will also provide further insights into the health of the US economy.
