Asian session review: the US dollar stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies, as market participants are cautious ahead of the publication of a key report on the US labor market, which may clarify the timing of the Fed's monetary policy easing.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.02% to 104.09 (the lowest value since April 10). The key event on Friday will be the publication of the nonfarm payrolls report for May (at 12:30 GMT). The nonfarm payrolls growth accelerated in the first quarter, increasing by an average of 269 thousand compared with an average monthly growth of 213 thousand in the second half of 2023. Strong job growth and unexpected surprises in the inflation data forced the FOMC to postpone its plans to cut rates until at least the second half of the year. At the beginning of the second quarter, job growth weakened again, while employment increased by 175 thousand people in April. It is expected that the nonfarm payrolls growth in the next few months will be more similar to April, while employment growth of 185 thousand is projected in May. April saw sharp slowdowns in leisure and hospitality and government hiring compared to recent trends in each sector. Leisure and hospitality employment grew by 5,000 in April, compared with a monthly average of 25,000 in the first quarter, while government hiring grew by 8,000, compared with an average of 62,000 in the first quarter. Experts expect that a partial recovery in these sectors will help increase hiring in May compared to April, but lower labor demand should continue to keep employment growth below the high rates recorded in the first quarter. Meanwhile, the unemployment rate probably remained at 3.9% in May. Higher-than-expected labor market indicators may weaken the likelihood of easing the Fed's monetary policy. According to the CME FedWatch Tool, markets see a 20.6% probability of a 25 basis point rate cut at the Fed meeting in July, a 68.2% probability of a rate cut in September, and a 79.4% probability of monetary policy easing in November. Overall, markets currently price in 50 basis points of cuts by end-December.

The yen rose 0.2% against the US dollar, while investors are gradually preparing for the meeting of the Bank of Japan, which will be held next Friday. Although an interest rate hike at this meeting is highly unlikely, consensus is building in the market for an imminent reduction in Bank of Japan monthly bond purchases. Meanwhile, Japanese Finance Minister Shunichi Suzuki confirmed his willingness to take measures against excessive currency swings, but added that restraint is also required.