The dollar experienced losses on 4 June as continuing expectations of a treaty in the Gulf weighed on the greenback ahead of the American Non-Farm Payroll (NFP) release scheduled for 5 June. News on 4 June that Israel and Lebanon had agreed a ceasefire appeared positive for progress between the USA and Iran, with financial market participants remaining generally confident that conflicts will be resolved within the next few weeks. The upcoming NFP data represents key information for CFD traders as the American job market shows signs of resilience following consecutive positive releases.
Israel-Lebanon Ceasefire Affects Dollar Sentiment
Oil retreated on 4 June while gold bounced as participants continued to see progress for the Gulf conflict. Israel and Lebanon agreed a ceasefire, which might have removed one primary sticking block between the USA and Iran. However, Hizballah wasn't consulted about the Israeli-Lebanese agreement and it didn't give a timeline for the end of Israel's current occupation of border areas in southern Lebanon.
NFP Consensus Expects 85,000 Jobs Added
The consensus on 4 June was for about 85,000 for the next NFP. May's NFP covering April was the first consecutive positive NFP in more than a year and indicated that the labour market in the USA might be resilient. March's figure was revised to 185,000. Unemployment has remained stable, having risen from the average in 2022 and 2023 but not showing any immediate sign of pushing consistently much higher when considered with recent NFPs and demographic factors.
CME FedWatch Shows Split Rate Expectations
Expectations for the funds rate at the end of the year are divided between hold (46% according to CME FedWatch) and at least one hike (52%). A relatively decent job market gives the Fed flexibility to hike rates if inflation continues to rise. The economic pressure on the American government to end the war is high. Between the NFP on 5 June and American inflation the following Wednesday, traders will have data for both short-term movements and Fed direction.
EURUSD Bounces From $1.16 Support Level
The ECB is nearly certain to hike its main refinancing rate to 2.4% on 11 June. Current expectations suggest a total of 2-3 hikes by the ECB before the end of 2026 while there's considerable uncertainty over whether the Fed will hold or hike once. The price bounced on 4 June from the support around $1.16 which coincides with the 23.6% weekly Fibonacci retracement. Volume has been significantly lower in the last few days. The 50 SMA from Bands around $1.17 is likely to cap gains in the immediate future.
USDJPY Holds Around ¥160 Amid Intervention Concerns
Dollar-yen's recovery from last month's intervention has continued in June with the price holding around ¥160. The latest intervention by the Japanese authorities was worth over ¥11 trillion but didn't have any clear, lasting effect in shoring up the struggling yen. Participants expect the BoJ to hike to 1% on 16 June despite inflation significantly below target. ¥156.50 is a possible support given that the price failed to break through there in late April and early May.
FAQ
What is the consensus expectation for the NFP release on 5 June?
The consensus on 4 June was for about 85,000 jobs added for the next NFP, representing a somewhat weaker release than last month's strong data. May's NFP covering April was the first consecutive positive NFP in more than a year with March's figure revised to 185,000.
How did the Israel-Lebanon ceasefire on 4 June affect currency markets?
News on 4 June that Israel and Lebanon had agreed a ceasefire appeared positive for progress between the USA and Iran, contributing to dollar losses as continuing expectations of a treaty in the Gulf weighed on the greenback. Oil retreated while gold bounced on 4 June as participants saw progress for the Gulf conflict.
What are current expectations for Fed and ECB rate decisions?
Expectations for the Fed funds rate at the end of the year are divided between hold (46% according to CME FedWatch) and at least one hike (52%). The ECB is nearly certain to hike its main refinancing rate to 2.4% on 11 June with current expectations suggesting a total of 2-3 hikes by the ECB before the end of 2026.
