The dollar index rose 0.5% in the wake of non-farm payrolls and revisions beating forecast by 242k, outweighing the unexpectedly large 0.3% jobless rate rise and softer earnings enough to send 2-year Treasury yields up 16bp, despite the Fed still favored to interrupt its run of ten straight rate hike in June.
May's 339k print was the 14th consecutive payrolls report to beat forecast, though the household survey clashed with a 310k drop in employment, thus the jobless rate jump from 3.4% to 3.7% versus 3.5% forecast.
It followed jumps in JOLTS and ADP and fairly steady jobless claims and last week's above forecast personal spending and core PCE.
This week's Fed speakers made the case for skipping a hike rate at the June 13-14 meeting, perhaps to better judge cumulative and lagging credit tightening risks in H2.
Passage of the U.S. debt ceiling deal alleviates some financial and economic risk that might have restrained rate hiking plans, though the Treasury now has to sell more debt to cover measures taken to delay the default date.
EUR/USD fell 0.5%, undoing a chunk of the recovery from Wednesday's lows that came despite softer euro zone inflation, though not enough to price out at least two more ECB rate hikes.
USD/JPY rose a hefty 0.9% with JGB yields cloistered by BoJ's yield curve control that has endured despite above target inflation, while risk-on flows worked broadly against the haven yen.
Sterling fell apart after the London close, shedding 0.65% Friday in a delayed reaction to the payrolls-driven surge in Treasury yields.
Worries about a wobbly UK housing market and tenaciously high inflation outweighed risk-on flows, with a 15bp dive in 2-year gilts-Treasury yield spreads dominating.
Monday's ISM non-manufacturing carries extra weigh into the Fed's pre-meeting blackout period.
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