The US Dollar has gained ground against several major currencies, driven by stronger-than-expected US jobs data and rising expectations that the Federal Reserve will maintain higher interest rates for longer. The USD/CAD pair traded around 1.3905 during early European hours on Thursday, buoyed by positive US labor market reports such as the May ADP private payrolls and JOLTS job openings, which have prompted traders to price in nearly a 42% chance of a Fed rate hike in December, according to the CME FedWatch Tool [1]. Technical analysis shows USD/CAD holding above key support levels, with immediate resistance at 1.3910 and further upside targets at 1.3928 and 1.3966 [1].
MUFG analysts highlight that elevated Brent crude prices, amid persistent US–Iran tensions, have also supported the US Dollar. The US 2-year Treasury yield remains above 4%, reinforcing a carry-driven bid for the dollar. ADP employment increased by 122k in May, up from 105k in April and above consensus expectations, while ISM services rose to 54.5 from 53.6, beating forecasts. New orders accelerated to 57.3, but the services employment component remained in contraction at 47.9. The prices paid index rose to 71.3, slightly below consensus. This macro backdrop anchors market expectations for a 'higher for longer' Fed funds rate, impacting Asian currencies such as JPY, KRW, SGD, IDR, PHP, and INR [2].
The Euro has edged up against the British Pound but remains capped near weekly lows, with cautious sentiment prevailing due to the lack of progress in the US-Iran peace process. Israel and Lebanon have agreed to a ceasefire, which could accelerate US-Iran negotiations, but markets remain skeptical about the deal's scope. Recent Eurozone data, including revised services activity and producer prices, failed to lift the Euro, as the market has already discounted a 25-basis-point ECB rate hike next week. ECB President Christine Lagarde is scheduled to speak ahead of Eurozone Retail Sales data, expected to show a third consecutive contraction [3]. UOB analysts maintain a cautious stance on EUR/USD, noting increased downward momentum and the risk of testing major support at 1.1590. A sustained drop below this level could open further downside toward 1.1555, though a clear break is seen as unlikely for now [6].
In Asia, the Indian Rupee has weakened 6.1% year-to-date against the USD, with recent RBI intervention reported to support the currency. The RBI is expected to keep its policy rate unchanged at 5.25%, focusing on FX stability amid growing upside risks to inflation. India will introduce new Producer Price Index (PPI) and revised Wholesale Price Index (WPI) on 15 June, aiming to improve inflation measurement, though immediate policy impact is limited. USD/INR rose 0.5% to 95.71 yesterday as oil prices gained on geopolitical uncertainty and US tariff concerns [4].
The Australian Dollar (AUD) is consolidating against the USD, trading around 0.7130, with technical analysis indicating a neutral tone and fading bullish momentum. The AUD was the strongest against the Canadian Dollar among major currencies today, but remains capped by the nine-day EMA. A break above 0.7153 could trigger further bullish movement, while support lies at 0.7127 and 0.7070. The heat map shows mixed performance across major currencies, with AUD outperforming CAD but underperforming against USD and other majors [5].
CONCLUSION
The US Dollar's strength, underpinned by robust economic data and expectations of prolonged higher Fed rates, has exerted pressure on global currencies, particularly the Canadian Dollar, Euro, Indian Rupee, and Australian Dollar. Market sentiment remains cautious amid geopolitical uncertainties and central bank policy stances. The outlook suggests continued USD resilience unless upcoming data or central bank actions shift expectations.