US Dollar Holds Firm After Strong NFP Data; Gold Pressured by Rising Oil Prices

Key Takeaways

• US dollar rebounds after stronger-than-expected Nonfarm Payrolls data

• Rising oil prices lift Treasury yields and inflation expectations

• Trumps rejection of Iran proposal supports safe-haven dollar demand

• Gold declines as stronger USD and higher yields weigh on sentiment

Market Summary

The US dollar index, which tracks the greenback against a basket of six major currencies, rebounded and gapped higher over the weekend following the release of stronger-than-expected U.S. labor market data.

According to the latest Nonfarm Payrolls report, job growth exceeded market expectations, reinforcing the resilience of the U.S. economy. However, other components of the report delivered a more mixed picture. The unemployment rate remained in line with expectations, while average hourly earnings rose only 0.2%, below the forecast of 0.3%, signaling that wage pressures may be easing slightly.

Despite the mixed details, the overall labor market performance helped support the dollar, although gains remained relatively limited after the initial rebound.

Additional support for the greenback came from a sharp rise in oil prices over the weekend after Donald Trump rejected Irans latest proposal to end the ongoing conflict. The renewed geopolitical tensions pushed crude oil prices higher, raising concerns over inflation risks and supporting a rebound in U.S. Treasury yields.

The increase in yields reinforced expectations that major central banks, including the Federal Reserve, may need to maintain a relatively hawkish stance if energy-driven inflation pressures persist.

Gold Under Pressure from Stronger Dollar and Rising Yields

Gold prices moved lower as the stronger U.S. dollar and rising Treasury yields reduced the appeal of non-yielding assets.

Following Trump‘s rejection of Iran’s latest peace proposal, oil prices rebounded sharply, fueling inflation concerns and increasing expectations for tighter monetary policy globally. This combination strengthened the dollar and increased the opportunity cost of holding gold, placing downward pressure on the precious metal.

Overall, gold remains sensitive to both geopolitical developments and monetary policy expectations, with rising yields continuing to act as a major headwind for the safe-haven asset in the near term.