DXY Breaks Below 98.00 as NFP Wage Growth Cools to 0.2%

US Dollar Index Breaks 98.00 on Wage Growth Miss

US Dollar Index ($DXY) futures slid 0.23% to 97.84 during the Friday New York session after the April Non-Farm Payrolls report printed 115,000 new jobs against a 65,000 consensus. The greenback faced immediate downward pressure despite the massive headline employment beat because average hourly earnings rose a tepid 0.2% month-over-month, missing the 0.3% forecast. This specific wage miss signaled to markets that wage-driven cpi" title="Understanding inflation and CPI in forex">inflation pressures are stabilizing, prompting a swift sell-off in dollar-denominated assets as traders adjusted their rate expectations.

Data from the Bureau of Labor Statistics showed the headline unemployment rate holding steady at 4.3%, while March job gains received an upward revision from 178,000 to 185,000. The counter-intuitive market reaction of selling the dollar on a strong jobs report stems directly from the Federal Reserve's current focus on inflation metrics over pure employment growth. According to pricing in the CME FedWatch tool, traders now assign a 93.4% probability that the central bank will hold the benchmark interest rate at the current 3.50% to 3.75% range during the June FOMC meeting.

Bank of America economists revised their macro forecasts following the release, predicting the Fed will delay lowering borrowing costs until the second half of 2027. The analysts cited stubborn US inflation, which remains elevated at 3.3%, as the primary driver for the extended pause. The combination of softer US bond yields and a decline in safe-haven demand amid renewed hopes for a Middle East ceasefire kept the DXY pinned near its daily lows heading into the weekend close.

EUR/USD Clears 21-Day Moving Average to Hit 1.1790

EUR/USD rose 0.56% to hit 1.1790, decisively breaking its 21-day Simple Moving Average in European trade. Broad dollar weakness provided the initial lift, while hawkish commentary from European Central Bank officials sustained the momentum. ECB Governing Council member Joachim Nagel stated the bank is highly vigilant regarding energy-driven inflation from the Middle East conflict. Nagel signaled a likely rate hike in June from the current 2.15% main refinancing rate, even as he warned that Germany's potential annual economic growth is projected at a sluggish 0.4% over the coming years.

GBP/USD climbed 0.6% to reach 1.3630, shrugging off domestic political instability in the United Kingdom. Sterling held its ground and advanced against the weaker dollar even as the UK Labour Party suffered significant losses in local elections. Prime Minister Keir Starmer vowed to remain in office, and currency traders largely ignored the political noise to focus on the widening yield differentials between the UK and the US. The cross pair GBP/JPY also edged back up above the 213.00 level, recovering from the Bank of Japan's alleged market interventions earlier in the week.

USD/JPY Stabilizes Near 156.67 Following $32 Billion Intervention

USD/JPY traded steadily between 156.67 and 156.85 throughout the Asian session. The yen found solid footing after reports confirmed Japanese authorities intervened in the forex market during the early May holidays. The Ministry of Finance spent an estimated 5 trillion yen, roughly $32 billion, to pull the currency back from the critical 160.00 level.

Newly released Bank of Japan minutes indicate that board members are weighing further rate hikes above their current 0.75% level if the Iran war-driven energy shock persists. The central bank recently raised its FY2026 core inflation forecast significantly, moving the projection from 1.9% to 2.8%. This hawkish pivot provides a fundamental floor for the yen, deterring short sellers from testing the intervention boundaries.

In emerging markets, Bank Indonesia Governor Perry Warjiyo announced the central bank is going all out to defend the rupiah. This aggressive market operation is a direct response to massive foreign portfolio outflows that totaled $1.7 billion in the first quarter of the year. The Bank of Mexico announced its final interest rate cut to conclude a two-year easing cycle, passing a split decision that reflects ongoing concerns over weak economic growth and above-target inflation. Norges Bank and the National Bank of Moldova became the first central banks in Europe to officially hike interest rates in response to the recent energy price spikes caused by the ongoing Iran war.

Spot Gold Surges Past $4,715 as Brent Crude Reclaims $101

XAU/USD increased 0.5% to trade at $4,715.24 per ounce following the US labor data release. US gold futures also rose 0.2% to $4,719.60 per ounce, driven by strong safe-haven demand amid ongoing US-Iran geopolitical tensions in the Middle East and the softer dollar profile. Tracking gold's momentum, spot silver surged 2.1% to reach $80.09 per ounce, while platinum rose 0.6% to $2,034.80 per ounce.

Brent crude futures jumped 3% intraday before paring some gains to settle at $101.73 per barrel, marking a 1.66% daily increase. US West Texas Intermediate crude futures finished up 0.64% to reach $95.42 per barrel. Oil prices are experiencing extreme volatility as commodity traders weigh recent military exchanges in the Strait of Hormuz against diplomatic efforts for a renewed ceasefire. Copper futures rose 2.04% to $6.25 per pound, supported by a Chinese export ban on sulphuric acid that is disrupting global copper refining. The S&P GSCI Commodity Index sits at 722.30 points, up 35.89% compared to the same time last year.

The softer wage data fueled a massive tech rally in the equity markets. The Nasdaq Composite surged 440.88 points to close at a record 26,247.08. The S&P 500 gained 61.82 points to hit an all-time high of 7,398.93. Micron Technology shares rallied 16% to close at $671.30 after the company began shipping commercial solid-state drives, capping off a 37.73% gain for the week.

Key Technical Levels and the May 12 CPI Catalyst

For your trading week ahead, the April Consumer Price Index release on Tuesday, May 12, serves as the definitive macro catalyst. With the March CPI reading at 3.3% year-over-year, you must watch the 97.50 support level on the DXY. A hotter inflation print points to an immediate reversal of Friday's dollar sell-off, pushing the index back toward the 98.40 resistance zone.

For EUR/USD, your upside resistance sits at 1.1820. A failure to hold the 21-day SMA upon the CPI release points to a retracement back toward the 1.1710 support floor. Watch the 156.00 level on USD/JPY closely, as any aggressive test of this boundary by dollar bulls often attracts verbal intervention from Japanese finance officials ahead of the Tokyo fix. You must also monitor the Q1 2026 Advance GDP estimate of 2.0%, as the second GDP estimate scheduled for May 28 will provide further context for the Fed's prolonged rate pause.