Nonfarm Payrolls reaffirm hot job market

May’s employment data exceeded expectations, adding 272,000 jobs compared to the 185,000 forecasted by analysts. This robust addition marks a turnaround from the cooling seen in April, and expected this month. Markets reacted sharply to the news, as this NFP data has been viewed as a strong momentum indicator for the employment sector so far this year. Market participants chose to overlook the slight uptick in the unemployment rate to 4% in favor of the added jobs.

Gold prices fall more than $50

In the hours following the release, gold prices took a significant hit, plummeting over $50 to settle below $2,350. The drop in gold futures reflects investors’ shifting preference towards more interest-bearing assets, as expectations shift towards higher interest rates in the foreseeable future.

US Treasury yields climb 10 basis points

The upbeat job report led to a surge in US Treasury yields, which climbed by 10 basis points across the curve. This increase signifies strengthened US interest rates, often a direct reaction to positive economic indicators that bolster investor confidence in the economy’s prospects, as well as anticipation of the Fed’s next moves..

US dollar strengthens vs euro, yen, and more

The strong jobs data also propelled the US dollar to appreciate more than 50 pips against major currencies such as the euro (EUR/USD), yen (USD/JPY), and Australian dollar (AUD/USD) — reversing some of the recent weakening trends. This surge underscores the dollar’s responsiveness to domestic economic shifts and the rising yield on dollar-denominated assets.

Fed rate cut probabilities slide on strong NFP

The likelihood of a Federal Reserve rate cut in September took a downturn, according to the CME, dropping from 68% to nearly 50% following the robust Nonfarm Payroll report. Markets are still pricing in the possibility of multiple rate cuts this year, though time is beginning to run out as pressure mounts on the November and December meetings. Such data often adjust market expectations regarding the pace and timing of monetary policy changes, highlighting the vital role employment figures play in forecasting financial conditions.