NFP Takes Centre Stage as Dollar and Gold Await Direction

Key Takeaways:

• Today's US Non-Farm Payrolls report is expected to be the key catalyst driving the next major move in both the US dollar and gold.

• USD remained supported by resilient economic data and expectations that the Federal Reserve will maintain a higher-for-longer interest rate stance.

• Fed Chair Kevin Warsh reaffirmed the Fed's commitment to price stability while signalling that future policy decisions will remain data dependent.

Market Summary:

The US dollar remained broadly supported while gold recovered from recent weakness as investors adopted a cautious stance ahead of today's highly anticipated June Non-Farm Payrolls (NFP) report, the week's key market-moving event. Consensus forecasts expect around 110,000 new jobs, with the unemployment rate holding at 4.3% and average hourly earnings rising 0.3% month-on-month. A stronger-than-expected report would likely reinforce expectations that the Federal Reserve will maintain a higher-for-longer policy stance, supporting the US dollar and Treasury yields while pressuring gold and other risk-sensitive assets. Conversely, weaker employment data could revive expectations for monetary easing, weighing on the dollar while supporting gold and broader market sentiment.

The dollar also continued to draw support from Federal Reserve Chair Kevin Warsh's remarks at the ECB Forum in Sintra. While acknowledging that inflation expectations and price risks have eased in recent weeks, Warsh reaffirmed the Fed's commitment to restoring inflation to its 2% target and stressed that future policy decisions will remain data dependent. He also announced plans to expand the use of real-time economic data over the coming year to improve the Fed's policy assessment.

Recent US economic data presented a mixed but generally supportive picture. ADP private payrolls rose by 98,000 in June, below expectations, while Challenger job cuts fell to their lowest level since late 2025, indicating layoffs remain limited. Manufacturing activity stayed in expansion despite moderating slightly, while input cost inflation eased further. Together, these indicators supported the view that the labour market remains resilient and inflation pressures continue to moderate, helping keep the Dollar Index near 101.3–101.4, close to its highest level in over a year. Gold rebounded above US$4,000 after softer employment data and easing inflation expectations reduced concerns over further aggressive Fed tightening. However, persistent dollar strength, elevated Treasury yields, and expectations of higher interest rates continue to limit upside, leaving today's NFP report as the key catalyst for gold's next directional move.

Meanwhile, easing geopolitical tensions also influenced sentiment. Progress in US-Iran negotiations and improving shipping conditions through the Strait of Hormuz reduced safe-haven demand after President Donald Trump said talks with Iran were progressing well and highlighted falling oil prices. While reduced geopolitical risks have limited gold's upside, lingering global uncertainty continues to provide underlying support. In currency markets, the Japanese yen remained under pressure as USD/JPY hovered near 40-year highs around 162.5, keeping traders alert for possible intervention by Japanese authorities.