US FX WRAP: Dollar slips as retreat in oil prices offsets strong NFP report
The dollar index was weaker as the retreat in oil prices in late US afternoon on Thursday and, as such, lower US yields offset the better-than-expected NFP reading. Payrolls grew 115k, above the expected 73k, with the unemployment rate remaining at 4.3%. This gives the Fed some comfort regarding the jobs market, as employment has stabilised in the last two months, putting greater focus on the inflation mandate. Meanwhile, lower oil prices were a function of the US saying it does not seek an escalation after striking Iran yesterday and continued hopes Iran's response will lead to a step closer to a resolution. In other news, consumer sentiment took a dip in the UoM report for May, weighed by real income expectations declining amid citations on gasoline prices and tariffs. Inflation expectations came down on the 1-year to 4.5% (prev. 4.7%) and 3.4% (prev. 3.5%). DXY.
CAD underperformed, weighed down by employment growth unexpectedly turning negative. Employment fell 17.7k (exp. 5.1k), leaving the unemployment rate rising to 6.9% from 6.7%, its highest level since October 2025. USD/CAD rose marginally to 1.3678.
GBP outperformed on Friday as local elections in the UK thus far point towards Labour avoiding the absolute worst-case scenario. Nonetheless, over 1,200 council seats have been lost at the time of writing for Labour, signalling a massive loss of confidence in the party. PM Starmer offered the pound support, suggesting that he intends to remain as the PM into the next General Election. Cable now sits around highs of 1.3631.
The US dollar slipped despite better-than-expected Non-Farm Payroll (NFP) data, as falling oil prices and lower US yields exerted downward pressure. This NFP reading suggests stability in the job market, which may give the Federal Reserve confidence, but the market's reaction indicates that inflation outlook—the significant concern for policy—remains in focus, particularly amid declining consumer sentiment related to gas prices. Consequently, while employment figures are reassuring, the combination of falling energy prices and inflation expectations may influence market dynamics going forward.