Soft US Jobs Report Knocks the Dollar Off Its Highs and Reignites Gold

The dominant story into the long US holiday weekend was a sharply weaker June jobs report. The US economy added just 57,000 jobs, the fewest in four months and far below the roughly 110,000 economists expected. The unemployment rate slipped to 4.2%, but the fall came mainly from workers leaving the labour force rather than genuine strength, underlining a cooling labour market. A softer private-sector hiring print earlier in the week had already set the tone.

Why it matters: for weeks the market had been pricing rate hikes under new Fed Chair Kevin Warsh, whose first meeting held rates at 3.50%-3.75% but produced hawkish projections. The jobs miss unwound part of that. Fed funds futures now imply roughly a 50% chance of a September hike, down from about 67% before the report. Warsh added to the dovish shift at the ECB's Sintra forum, noting inflation expectations had eased while still reaffirming the commitment to price stability.

The dollar took the hit. The DXY index tumbled and held below 101, on track for its steepest weekly drop since April and snapping a two-week winning streak. The greenback's heaviest losses came against the yen and Swiss franc, while the euro rebounded toward 1.145 from recent one-year lows. Gold, which had suffered its worst month since 2013 in June, jumped around 2% and pushed back above $4,100, helped by lower yields and softer oil as US-Iran talks eased Middle East supply fears.

The backdrop keeps a lid on the euro's upside: eurozone inflation cooled to 2.8% in June and ECB President Lagarde struck a less urgent tone at Sintra, trimming bets on a third ECB hike. So this is as much a dollar-weakness story as a euro-strength one, and the rate-divergence trade between the Fed and ECB remains the pair's core driver into the July 23 ECB and July 29 Fed meetings.

Technical outlook, EUR/USD: the pair reclaimed the pivotal 1.1400 zone and traded near 1.1448, with clear resistance around 1.1470. Holding above 1.1400 keeps the near-term bias constructive; a break and close above 1.1470 would open room toward the 1.1535 area and extend the recovery. If 1.1400 gives way again, the 1.1360 support comes back into focus, and a break below that revives the dollar bulls and points back toward the yearly low near 1.1325.

Technical outlook, gold: spot is trying to base after reclaiming $4,100, with the recent intra-year floor around $4,170 and the 200-day moving average cited near $4,340 acting as the next hurdles overhead. As long as price holds above the $4,020-$4,050 recovery base, the bias leans cautiously higher, with a push through $4,170 needed to confirm the bounce. A slide back below $4,020 would signal the rebound has stalled and re-expose the June lows. The July 29 Fed decision is the next major catalyst for both.