The US Dollar Index (DXY) hovered near 100.90 after June Nonfarm Payrolls rose 57,000 and May was revised to 129,000 from 172,000, pointing to softer hiring momentum. The Unemployment Rate dipped to 4.2%, while labour force participation eased to 61.5%, and Average Hourly Earnings held firm at 0.3% MoM and 3.5% YoY. EUR/USD climbed 0.5% to 1.1430 as the weaker dollar lifted the pair, and Eurostat put the euro area jobless rate at 6.2% in May, unchanged from April. Across the EU, unemployment stood at 5.9%, steady on the month and down from 6.0% in May 2025.
GBP/USD traded near 1.3350, while USD/JPY fell almost 1% to about 161.10 as lower Treasury yields followed the US data. AUD/USD firmed around 0.6920 ahead of Australia’s final S&P Global Composite PMI and Services PMI for June, after flash readings of 49.8 and 49.9, and with China’s RatingDog Services PMI due after 54.4 in May. In commodities, WTI held at $68.60 a barrel and gold rose to $4,124.
Federal Reserve Outlook And Market Volatility
Given the dramatic slowdown in the US jobs report, we believe the Federal Reserve will be forced off its hawkish path. We’ve seen fed funds futures pricing shift accordingly, with the CME FedWatch Tool now indicating less than a 5% probability of a rate hike in the next quarter, down from over 30% just last week. This pivot means we should anticipate higher market volatility, making long-volatility positions on indices like the S&P 500 attractive.
The US Dollar Index is set for a period of sustained weakness as its interest rate advantage disappears. The decline in the 10-year Treasury yield, which fell over 15 basis points immediately following the jobs data, confirms this trend. We are positioning for this by buying put options on dollar-tracking ETFs to capitalize on further downside over the coming weeks.
Currency And Commodity Strategies
We see the Euro as a primary beneficiary of the dollar’s slide, supported by a resilient Euro area labor market where unemployment has held steady at 6.2%. In contrast, the Pound’s upside seems limited by ongoing uncertainty surrounding the Bank of England’s policy. Therefore, we favor buying EUR/USD call options over taking a similar position in GBP/USD.
The slide in USD/JPY below 161.10 is significant, but the risk of intervention by Japanese authorities remains extremely high. We remember the sudden, sharp appreciation of the Yen following the Ministry of Finance’s actions in late 2022 when the pair was trading at lower levels than today. Buying JPY call options is a prudent strategy to position for a similar sudden move while limiting risk.
With the US dollar weakening and rate expectations falling, Gold at $4,124 is in a powerful uptrend. This price action confirms a major breakout, and we are looking at call option spreads to continue riding this momentum. We remain more cautious on WTI oil, as concerns about slowing US economic growth could soon outweigh geopolitical support and cap any price rallies.
The Australian Dollar is benefiting from the weak greenback, but its path forward depends heavily on data from China. The upcoming RatingDog Services PMI will be critical; a strong reading above 54 could propel AUD/USD higher. We are holding off on new Aussie positions until that data provides a clearer picture of regional economic strength.
