The US Dollar traded lower against major peers during the European session on Friday, with the US Dollar Index (DXY) down 0.17% to near 99.28 ahead of the highly anticipated US Nonfarm Payrolls (NFP) report for May, scheduled for release at 12:30 GMT [5]. The USD/JPY pair consolidated in a tight range around 160.00, reflecting investor caution as market participants awaited fresh cues from the employment data, which is expected to influence the Federal Reserve’s monetary policy outlook [1]. The Swiss Franc extended its gains against the US Dollar for a second day, with USD/CHF hitting session lows at 0.7872, supported by moderate US Dollar weakness as traders trimmed USD long positions ahead of the NFP release [2].
Consensus estimates across sources point to the US economy adding 85,000 jobs in May, down from 115,000 in April, with the unemployment rate expected to remain steady at 4.3% [1][2][5]. Average Hourly Earnings are projected to rise 3.4% year-on-year, down from 3.6%, but to accelerate slightly on a monthly basis to 0.3% from 0.2% in April [1][5]. UBS Chief Economist Paul Donovan noted that the labor report may offer a weak and unreliable signal, with expectations for a sub-100,000 payrolls number and flat unemployment, highlighting the scattered range of estimates and the potential for workforce composition to distort wage data [3].
Market analysts suggest that, despite the anticipated slowdown in job creation, the labor market remains solid compared to last year’s 10,000 average monthly gain [2]. The NFP report follows a series of upbeat US manufacturing and services activity data earlier in the week, and a result in line with expectations would reinforce the view that the Federal Reserve may need to consider further rate hikes if inflation remains persistent [2]. However, recent comments from FOMC members, including Minneapolis Fed President Neel Kashkari, indicate that the central bank is currently more focused on reducing inflation than on supporting moderate job growth, with Kashkari stating it is "far too soon to make prediction on when next Fed move could be" [5].
Technical analysis shows USD/JPY holding a bullish near-term bias above its 20-day EMA at 159.23, with the 14-day RSI at 61, suggesting constructive upside momentum [1]. The Swiss Franc was the strongest performer against the US Dollar, which was the weakest among major currencies, losing 0.26% against CHF and 0.06% against JPY [5]. On the geopolitical front, ongoing tensions in the Middle East are providing some support to the safe-haven US Dollar, though this has not prevented its overall weakness ahead of the NFP [2].
UBS also highlighted that US consumers are reducing their savings rate to maintain spending as real incomes come under pressure from rising prices, with job security remaining a key factor supporting consumer confidence [3].
CONCLUSION
Markets are in a holding pattern as traders await the US May Nonfarm Payrolls report, with the US Dollar broadly weaker and the Swiss Franc and Japanese Yen outperforming. The outcome of the NFP is expected to shape expectations for future Federal Reserve policy, but recent Fed commentary suggests inflation remains the primary concern. A weaker-than-expected jobs report could reinforce the current cautious stance, while a surprise to the upside may revive rate hike speculation.