The dollar index (DXY00) this morning is down by -0.28% and fell to a 3-week low.  The dollar sank today as T-note yields retreated on the weaker-than-expected US Apr unemployment report and Apr ISM services index.  The reports boost the chances of the Fed cutting interest rates this year, a bearish factor for the dollar.  Also, today’s stock rally has reduced the liquidity demand for the dollar.  The dollar recovered from its worst levels based on hawkish comments from Fed Governor Bowman, who said she was "willing to hike" interest rates if inflation stalled or reversed.

US Apr nonfarm payrolls rose +175,000, below expectations of +240,000 and the smallest increase in 6 months. The Apr unemployment rate unexpectedly rose +0.1 to 3.9%, showing a weaker labor market than expectations of no change at 3.8%.

US Apr average hourly earnings rose +0.2% m/m and +3.9% y/y, weaker than expectations of +0.3% m/m and +4.0% y/y with the +3.9% y/y gain the smallest annual increase in 2-3/4 years.

The US Apr ISM services index unexpectedly fell -2.0 to 49.4, weaker than expectations of an increase to 52.0 and the steepest pace of contraction in 16 months.  The Apr ISM services prices paid sub-index rose +5.8 to 59.2, stronger than expectations of 55.0.

Fed Governor Bowman said inflation will likely remain elevated for "some time," and she's "willing to hike" interest rates if inflation stalls or reverses.

The markets are discounting the chances for a -25 bp rate cut at 15% for the June 11-12 FOMC meeting and 43% for the following meeting on July 30-31.

EUR/USD (^EURUSD) today is up by +0.33% at a 3-week high.  The main bullish factor for the euro today is dollar weakness after the weaker-than-expected US Apr payroll report and Apr ISM services index bolster the chances of the Fed cutting interest rates. 

The Eurozone Mar unemployment rate was unchanged at 6.5%, right on expectations.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 95% for its next meeting on June 6.

USD/JPY (^USDJPY) today is down by -0.46%.  The yen today is moving higher on speculation that Japanese authorities may step into the currency market again to support the yen. According to Bloomberg estimates, the BOJ intervened in the forex market Wednesday for about 3.5 trillion yen ($22.6 billion), the second time this week Japan has intervened in the currency market to support the yen.  The yen recovered sharply from a 34-year low against the dollar on Monday after Japan intervened in the forex market to stem the yen’s slide.  Gains in the yen accelerated today after T-note yields tumbled on weaker-than-expected US reports on Apr nonfarm payrolls and the Apr ISM services index. 

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 11% for the June 14 meeting.

June gold (GCM4) this morning is down -12.9 (-0.56%), and July silver (SIN24) is down -0.344 (-1.28%).  Precious metals today gave up an early advance and turned lower, with gold falling to a 1-month low.  Precious metals prices turned lower on this morning’s hawkish comments from Fed Governor Bowman, who said she's "willing to hike" interest rates if inflation stalls or reverses.  Strength in stocks today has also curbed safe-haven demand for precious metals.  In addition, fund liquidation is weighing down gold prices after long gold holdings in ETFs fell to a 4-1/2 year low Thursday. 

Precious metals today initially moved higher after the dollar index dropped to a 3-week low. Also, lower global bond yields today are supportive of precious metals.  In addition, today’s weaker-than-expected US Apr unemployment and Apr ISM services index reports boost the chances for the Fed to begin cutting interest rates and are bullish for metals.   

• Stocks Jump on Apple Earnings and Dovish Apr Payroll Report
• Dollar Falls with Bond Yields
• Stocks Higher on Economic Optimism
• Dollar Recovers and Gold Falls as T-Note Yields Climb