On June 4th, data released by Automatic Data Processing (ADP) indicated that the private sector added 122,000 jobs in May, marking the highest level since February of last year and surpassing the market's prior expectation of 117,000. However, the April figure was revised down from 109,000 to 105,000. This data reinforces the view that the labor market is gradually strengthening after months of fluctuating hiring activity. With an increase in job openings and layoffs remaining low, if this trend is confirmed by the official US government employment data, markets may further bet that the Federal Reserve is more likely to raise interest rates in the coming months rather than cut them. The breakdown of the data shows the goods-producing sector added a total of 8,000 jobs, with construction adding 8,000, manufacturing adding 3,000, and natural resources/mining shedding 3,000. ADP Chief Economist Nela Richardson stated, "Job growth in May was more broad-based than at any point in the past several years. As the summer hiring season approaches, the labor market continues to show sustained momentum for growth."
Additionally, comments yesterday from Bank of Japan Governor Kazuo Ueda have further pushed market pricing towards a June rate hike being the central expectation. The core signal is that the central bank is beginning to more explicitly weigh upside risks to inflation, rather than solely emphasizing downside risks to the economy. On Wednesday, in his last scheduled public remarks before the policy meeting on June 15-16, Ueda stated that even if conditions remain uncertain, it would be necessary to "sufficiently discuss the pros and cons of raising the policy interest rate" if the judgment is that upside risks to prices outweigh downside risks to economic activity. This stance has reinforced market expectations for BOJ action this month. As of Wednesday afternoon, traders priced in roughly an 85% probability of a 25-basis-point hike by the BOJ this month. If realized, the benchmark rate would reach its highest level since 1995. A Nomura research report offered a more direct assessment: Ueda's remarks this time "likely pave the way for a BOJ rate hike in June," but did not signal an acceleration in the pace of tightening. In other words, a hike this month is now close to the market's baseline scenario, but "consecutive hikes" or a one-time 50-basis-point increase are still not the main narrative.
Data to watch today includes the Eurozone's April Retail Sales monthly figure and the US Initial Jobless Claims for the week ending May 30th.
Gold/US Dollar
Gold trended lower yesterday, hitting a fresh four-day low, with the spot price currently trading around $2,340. Apart from hawkish comments from Federal Reserve officials fueling expectations for a rate hike, which put pressure on gold, better-than-expected US economic data released during the session also weighed on the price. Furthermore, lingering tensions in the Middle East contributed to the downward pressure on gold. Resistance is seen around $2,350 today, with support near $2,320.
US Dollar/Japanese Yen
The USD/JPY pair moved higher yesterday, testing the 160.00 level and reaching a fresh five-week high, currently trading around 159.90. The primary driver supporting the pair's climb was a stronger US dollar index, bolstered by rising Fed rate hike expectations and positive economic data. Additionally, market risk-off sentiment provided some support. However, increasing expectations for a Bank of Japan rate hike and concerns over potential renewed Japanese intervention in the currency market capped the pair's upside. Resistance is eyed near 161.00 today, with support around 159.00.
US Dollar/Canadian Dollar
The USD/CAD pair advanced yesterday, testing the 1.3900 level and reaching a fresh eight-week high, currently trading around 1.3910. The main factor supporting the pair's rise was a stronger US dollar index, driven by heightened Fed rate hike expectations, robust economic data, and safe-haven demand. However, rising oil prices, supported by Middle East tensions, limited the pair's gains. Resistance is seen near 1.4000 today, with support around 1.3800.
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