The US dollar traded near its highest level in almost two months on Monday after a strong US employment report prompted investors to increase bets that the Federal Reserve will raise interest rates later this year, while the Japanese yen continued to drift toward levels that could trigger official intervention in the foreign exchange market.

Currency market moves were relatively calm compared to the turbulence seen across global financial markets, where a sharp selloff in technology stocks spread across Asia and weighed on European equities.

The dollar maintained the gains recorded after Friday’s employment report, which showed that US nonfarm payrolls increased by 172,000 jobs last month, significantly exceeding market expectations. The euro remained close to a nine-week low at $1.1525, while the British pound traded near a three-week low at $1.3344.

Jonas Goltermann, Chief Markets Economist at Capital Economics, said the US jobs report paints a picture of a labor market that continues to strengthen despite the ongoing energy price shock.

Federal Reserve meeting

He added that this combination makes further monetary tightening by the Federal Reserve later this year more likely, noting that Capital Economics now expects the Federal Open Market Committee to deliver two additional 25-basis-point rate hikes this year in response to higher energy costs and continued strength in the US labor market.

Even before the jobs report was released, investors had already been increasing expectations for higher interest rates as the global energy crisis linked to the conflict with Iran continued to fuel inflation concerns.

Weekly data from US regulators showed that investors cut their bullish euro positions to the lowest level in three months during the week ended June 4, while bearish bets against the Japanese yen increased to more than $10 billion, according to LSEG data.

The Federal Open Market Committee is scheduled to meet next week in its first gathering under Chair Kevin Warsh. Markets are currently pricing in roughly a 50% chance of a rate hike by September, which analysts say could limit excessive dollar buying in the near term.

Strategists at Barclays said upcoming factors, including shifts in risk appetite, the possibility of a US-Iran agreement, and the upcoming Federal Reserve meeting, may cap further dollar gains in the short term.

Middle East developments

In a new development in the Middle East, Israel announced that it carried out strikes against military targets in western and central Iran on Monday, despite reports that US President Donald Trump had urged Israeli Prime Minister Benjamin Netanyahu to refrain from launching additional attacks.

The developments pushed oil prices up about 5%, adding further concerns for investors already dealing with a sharp selloff in highly valued technology stocks.

Over the past two weeks, the dollar has benefited from its safe-haven status, in addition to expectations of a widening interest rate gap between the United States and other major economies, a factor that has particularly pressured the Japanese yen.

Japanese yen

The yen has now surrendered the gains achieved after Tokyo intervened in the currency market with approximately ¥11.7 trillion, equivalent to about $73 billion, a little more than a month ago, when the currency fell to its weakest level since July 2024 at ¥160.725 per dollar. The Japanese currency traded near ¥160.19 on Monday.

Reuters sources indicated that the Bank of Japan is expected to raise interest rates this month unless a major escalation in the Middle East conflict causes severe market disruption, while higher fuel costs resulting from the energy shock continue to increase inflationary pressures on the Japanese economy.

Sim Moh Siong, Market Strategist at OCBC, said this leaves the yen in a wait-and-see position because markets have already almost fully priced in a rate hike.

He added that any additional support for the yen from rate hike expectations will depend on whether the Bank of Japan signals a faster-than-expected pace of future interest rate increases.

Silver prices fell in European trading on Monday for a second consecutive session, hitting their lowest level in three months as a stronger US dollar and rising oil prices weighed heavily on the precious metal following renewed military exchanges between Iran and Israel.

The latest escalation comes as Washington and Tehran continue negotiations aimed at ending the conflict that has persisted for three months, with President Donald Trump seeking a diplomatic resolution before tensions in the Middle East deteriorate further.

Price Overview

• Silver prices declined 2.4% to $66.17 per ounce, the lowest level since March 23, down from an opening price of $67.78. The session high was recorded at $68.49.

• On Friday, silver fell 8.3%, marking its second decline in three sessions and its largest daily loss since May 15, following stronger-than-expected US employment data.

• The white metal lost 10% last week, extending its losing streak to four consecutive weeks, as a stronger US dollar and rising Treasury yields pressured prices.

US Dollar

The US Dollar Index gained 0.1% on Monday, extending its advance for a second straight session and reaching a two-month high of 100.17 points.

Strong US labor market data released on Friday reinforced expectations that the Federal Reserve may continue normalizing monetary policy and potentially raise interest rates later this year.

The dollar also received additional support from renewed safe-haven demand as military tensions between Iran and Israel intensified, threatening the fragile ceasefire in the Middle East.

Oil Prices

Global oil prices climbed more than 5% on Monday, resuming their strong rally after a two-day pause and moving toward their highest levels in several weeks.

The gains were driven by renewed fears of supply disruptions in the Middle East following military exchanges between Iran and Israel.

Developments in the Iran conflict

• Iran and Israel exchanged military strikes, putting the fragile Middle East ceasefire at risk.

• Iran’s Revolutionary Guard launched multiple waves of ballistic missiles targeting Israeli positions, including the Ramat military base, in response to strikes on Beirut’s southern suburbs.

• The Israeli military said it intercepted the incoming missiles while activating air raid sirens and raising alert levels at hospitals and schools.

• President Donald Trump held an urgent phone call with Israeli Prime Minister Benjamin Netanyahu, urging restraint and requesting that Israel avoid an immediate response.

• Israeli warplanes later carried out heavy strikes against military targets and sites inside Tehran.

• Trump reportedly informed Israeli officials that Washington was close to reaching a final agreement with Tehran through Pakistani mediation and requested additional time for diplomacy.

• The fragile ceasefire between the United States and Iran has been in effect since early April.

• Trump delivered a direct message to Tehran, saying: “You launched your missiles. That is enough. Return to the negotiating table immediately.”

• Trump also stated that the latest Iranian and Israeli strikes would not derail the broader peace agreement.

US Interest Rates

• Cleveland Federal Reserve President Beth Hammack said on Friday that employment data indicate the labor market is close to full employment, while persistent inflation may require the Federal Reserve to raise interest rates in the near future.

• According to the CME FedWatch Tool, the probability of a Federal Reserve rate hike at the December meeting increased from 47% to 75%.

• Markets continue to price a 99% probability that interest rates will remain unchanged at the June meeting, while the probability of a 25-basis-point rate cut stands at just 1%.

• Investors will closely monitor this week’s US economic releases, particularly the May inflation report, for additional clues about the Federal Reserve’s policy outlook.

Gold prices extended their losses in European trading on Monday, falling for a second consecutive session and hitting their lowest level in three months, as renewed military exchanges between Iran and Israel lifted both the US dollar and global oil prices.

Investors are also preparing for a crucial week of US economic data, with May inflation figures expected to provide fresh clues about the Federal Reserve’s interest-rate path for the remainder of the year.

Price Overview

• Gold prices fell 1.4% to $4,268.92 per ounce, the lowest level since March 23, down from an opening price of $4,328.87. The session high was recorded at $4,353.41.

• On Friday, gold lost 3.3%, marking its second decline in three sessions and its largest daily drop since March 20, following stronger-than-expected US employment data.

• The precious metal declined 4.65% last week, its third weekly loss in a month and its steepest weekly decline since March, amid a stronger US dollar and rising Treasury yields.

US Dollar

The US Dollar Index rose 0.1% on Monday, extending gains for a second straight session and reaching a two-month high of 100.17 points.

Friday’s strong US jobs report reinforced expectations that the Federal Reserve could continue normalizing monetary policy and potentially raise interest rates later this year.

The dollar also benefited from renewed safe-haven demand as military tensions between Iran and Israel intensified, raising concerns about the collapse of the fragile Middle East ceasefire.

Oil Prices

Global oil prices climbed more than 4% on Monday, resuming their strong upward trend after a two-day pause and moving toward multi-week highs.

The rally was driven by renewed fears of supply disruptions in the Middle East following military exchanges between Iran and Israel.

Developments in the Iran conflict

• Iran and Israel exchanged military strikes, threatening the fragile ceasefire in the region.

• Iran’s Revolutionary Guard launched multiple waves of ballistic missiles targeting Israeli positions, including the Ramat military base, in response to airstrikes on Beirut’s southern suburbs.

• The Israeli military said it intercepted the incoming missiles while activating nationwide warning systems and raising alert levels at hospitals and schools.

• President Donald Trump held an urgent phone call with Israeli Prime Minister Benjamin Netanyahu, urging restraint and asking Israel not to respond immediately.

• Israeli warplanes later carried out heavy strikes on military targets and sites inside Tehran.

• Trump reportedly informed Israeli officials that Washington was close to reaching a final agreement with Tehran through Pakistani mediation and requested several more days for diplomacy.

• The fragile ceasefire between the United States and Iran has been in place since early April.

• Trump issued a direct message to Tehran, saying: “You have launched your missiles. That is enough. Return to the negotiating table immediately.”

• Trump also stated that the latest Israeli and Iranian strikes would not derail the broader peace agreement.

US Interest Rates

• Cleveland Federal Reserve President Beth Hammack said on Friday that employment data indicate the labor market is close to full employment, while persistent inflation could require the Fed to raise interest rates in the near future.

• According to the CME FedWatch Tool, the probability of a Federal Reserve rate hike in December increased from 47% to 75%.

• Markets continue to price a 99% probability that rates will remain unchanged at the June meeting, while the probability of a 25-basis-point rate cut stands at just 1%.

• Investors will closely monitor this week’s economic releases, particularly the May inflation report, for further guidance on the Fed’s policy outlook.

Gold Outlook

Kelvin Wong, Senior Market Analyst for Asia-Pacific at OANDA, said the decline in gold prices reflects the increasingly hawkish tone being priced into Federal Reserve futures markets.

Wong added that higher US Treasury yields are creating additional pressure on gold.

SPDR Gold Trust

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, declined by 5.22 metric tons on Friday, marking the seventh consecutive daily reduction.

Total holdings fell to 1,019.92 metric tons, the lowest level since October 13, 2025.

The euro weakened against a basket of global currencies in European trading on Monday, extending its losses for a second consecutive session against the US dollar and falling to its lowest level in two months. The decline came as investors moved away from risk-sensitive assets amid escalating geopolitical tensions in the Middle East following a new exchange of military strikes between Iran and Israel.

Rising global oil prices have also revived concerns about accelerating inflation, increasing the likelihood that major central banks could raise interest rates in the near term, a sharp shift from pre-war expectations that rates would remain unchanged or move lower for an extended period.

Price action

• EUR/USD fell about 0.15% to $1.1506, its lowest level since April 6, compared with Friday’s closing level of $1.1521. The pair touched an intraday high of $1.1535.

• The euro ended Friday down 0.8% against the dollar, its largest daily loss since March 13, after stronger-than-expected US employment data boosted demand for the US currency.

• The single currency lost 1.2% against the dollar last week, marking its third weekly decline in a month, pressured by rising US Treasury yields and renewed geopolitical tensions in the Middle East.

US dollar

The US Dollar Index gained 0.1% on Monday, extending its advance for a second straight session and reaching a two-month high of 100.17 points, reflecting continued strength in the US currency against major global peers.

Strong US labor market data released on Friday reinforced expectations that the Federal Reserve may continue normalizing monetary policy and raise interest rates later this year.

The dollar also benefited from renewed safe-haven demand as military tensions between Iran and Israel intensified, threatening the fragile ceasefire arrangement in the region.

Oil prices

Global oil prices rose more than 3% on Monday, resuming their strong rally after a brief two-day pause and moving toward their highest levels in several weeks.

The gains were driven by renewed fears of supply disruptions from the Middle East as military exchanges between Iran and Israel escalated.

Latest developments in the Iran conflict

• Iran and Israel exchanged military strikes, raising concerns about the durability of the fragile ceasefire in the Middle East.

• Iran’s Revolutionary Guard launched multiple waves of ballistic missiles targeting Israeli sites, including the Ramat military base, in response to Israeli attacks on Beirut’s southern suburbs.

• The Israeli military reported intercepting the missiles while activating air raid sirens and placing hospitals and schools on maximum alert.

• US President Donald Trump reportedly held an urgent phone call with Israeli Prime Minister Benjamin Netanyahu, urging restraint and discouraging an immediate military response.

• Israeli warplanes carried out intensive strikes against military targets and other locations in Tehran, with powerful explosions reported across the capital.

• Trump informed Israeli officials that Washington was close to reaching a final agreement with Tehran through Pakistani mediation and requested additional time for diplomacy.

• The fragile ceasefire between the United States and Iran has technically remained in place since early April.

• Trump delivered a direct warning to Tehran, saying: “You’ve launched your missiles. That’s enough. Return to the negotiating table immediately.”

• Trump also stated that the latest Israeli and Iranian strikes would not derail the peace process.

European interest rate outlook

• As oil prices continue to rise, money markets have increased the probability of a 25-basis-point interest rate hike by the European Central Bank in June from 93% to 98%.

• According to sources cited by Reuters, the ECB is now widely expected to raise interest rates in June as inflation projections continue to move in an unfavorable direction.