Brown Brothers Harriman’s (BBH) Elias Haddad reports that renewed tensions between the US and Iran have contributed to gains in the US Dollar, crude oil prices, and global bond yields. The overnight escalation between the two countries has raised doubts about any imminent resolution to the Strait of Hormuz blockade, further supporting the Dollar and commodity prices [1].
The US macroeconomic backdrop, characterized by a restrictive Federal Reserve policy stance, is seen as a key factor underpinning further Dollar strength. Recent labor market data from the April JOLTS report indicates a stabilizing environment: the hiring rate declined from 3.5% in March to 3.2% in April, while the job opening rate increased by 0.4 percentage points to 4.6%, matching the high seen in November 2024. This suggests an improved outlook for labor demand [1].
Market participants are closely watching upcoming data releases, including the May ADP employment report, the ISM services index, and the Fed Beige Book. The ADP private payrolls print is expected at +120,000 compared to +109,000 in April, with preliminary estimates showing private employers added an average of +35,750 jobs per week for the four weeks ending May 9. The ISM services index is anticipated to rise by 0.2 percentage points to 53.8, driven by a slower contraction in employment. Additionally, the Prices Paid sub-index is forecast to increase by 1.6 percentage points to 72.3, the highest since August 2022, signaling potential upside risks to inflation [1].
CONCLUSION
Renewed geopolitical tensions and a restrictive Fed policy backdrop are supporting the US Dollar, oil prices, and global bond yields. Upcoming US economic data releases will be closely monitored for further confirmation of the macroeconomic narrative and potential market direction.