By Daniela Hathorn, senior market analyst at Capital.com
US employment data surprised to the upside, defying expectations for a lukewarm report. While the headline numbers — a 130,000 increase in employment and a slip in the unemployment rate to 4.3% do not suggest an overheating labour market, they were stronger than feared. All in all, the latest figures point to resilience rather than weakness.
The market reaction reflected ambiguity. Evidence of a labour market that is not deteriorating provides reassurance that recession risks remain contained. However, it simultaneously complicates the Federal Reserve’s policy outlook. A resilient jobs market reduces the urgency for aggressive rate cuts, leaving investors uncertain about how quickly easing will materialise. That tension produced a choppy session for equities, with major US indices finishing broadly flat as traders weighed relief against policy recalibration.
In currency markets, the US dollar initially strengthened on the back of the stronger labour data, as yields ticked higher. However, gains were quickly pared as broader “sell America” flows re-emerged, reportedly fuelled by speculation that President Trump may revisit elements of the USMCA trade agreement. The episode highlights that the dollar’s direction is currently being driven as much by capital flow narratives as by pure macro fundamentals.
US dollar index (DXY) daily chart
Looking ahead, markets are likely to anchor themselves to Friday’s inflation data. Forecasts suggest the critical core CPI measure could ease to around 2.5%, marking a near five-year low. If inflation comes in line with — or ideally below — expectations, the strength of the labour market may become secondary. A softer inflation print would keep rate cuts firmly priced in and could restore upward momentum in risk assets. In the near term, the interplay between resilient employment and moderating inflation will determine whether markets lean toward optimism or renewed caution.
In Europe, weaker-than-expected UK GDP figures have added to the cautious mood, with domestic sectors underperforming and broader indices trading slightly lower. Gold and silver are holding firm this morning, benefiting from the subtle shift toward defensive positioning. While the US jobs data did not point to a collapse in growth, it keeps Fed rate expectations anchored in the long-term, helping to contain real yields — a supportive backdrop for gold. Silver remains more volatile, reflecting its dual nature as both a precious and industrial metal. Overall, the strength in precious metals suggests that investors are still hedging against policy and geopolitical risks, even if panic is absent.
