The U.S. dollar index saw a significant rebound, reaching the 104 mark after the release of the non-farm payrolls report. The report indicated a stronger-than-expected increase in non-farm employment, leading to a surge in the dollar index and prompting a retreat in interest rate cut expectations.
Following the release of the non-farm payrolls report, the U.S. dollar index experienced a sharp rise, breaking through the 104 mark and increasing by more than 90 points intraday. This marked the first time the index had surpassed 104 since December 2023, when a “dovish shift” signal from the Federal Reserve had caused a significant drop in the dollar.
However, the situation has since reversed, with the Federal Reserve signaling a reluctance to lower interest rates before being more confident in the inflation rate moving towards 2%. Additionally, the non-farm payrolls report revealed a significant increase in non-farm employment, surpassing market expectations. This positive data has raised questions about the timing of potential interest rate cuts, with the market now believing there is a more than 30% chance that the current interest rate level will be maintained after the May meeting.
As a result, U.S. Treasury bond yields rose, and the U.S. dollar strengthened against G10 currencies. Currency strategists and analysts believe that as long as U.S. employment demand remains strong and wages remain firm, the dollar will continue to hold its ground. The dollar is on track to post a fifth straight week of gains, its longest winning streak since September last year.
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