NFP in Focus as Dollar Trades Sideways and Gold Retreats

The euro remained largely unchanged against the US dollar on Friday, with EUR/USD trading near 1.1620 during the early Asian session as investors awaited the release of crucial US labor market data.

Market participants are focusing on the US Nonfarm Payrolls (NFP) report for May, which is expected to provide fresh direction for the currency pair. Earlier this week, stronger-than-anticipated ADP private payrolls and JOLTS job openings figures pointed to continued resilience in the US labor market.

A stronger-than-expected jobs report could reinforce expectations that the Federal Reserve will maintain higher interest rates for longer, potentially boosting demand for the US dollar. According to CME FedWatch data, markets currently assign roughly a 42% probability to a Fed rate hike in December.

On the European side, expectations of further monetary tightening by the European Central Bank (ECB) may help support the euro. Economists surveyed by Reuters anticipate the ECB will raise its deposit rate to 2.25% at its June policy meeting, with an additional rate increase likely in September.

As a result, while the dollar could gain support from solid US employment data, the ECB's hawkish outlook may help limit downside pressure on the euro.

Gold prices moved lower in Friday’s early European trading, slipping toward a weekly low as investors reacted to stalled US–Iran ceasefire negotiations and positioned ahead of key US labor market data.

The precious metal remained volatile amid ongoing geopolitical tensions. Market sentiment was influenced by reports that there has been “no tangible progress” in talks aimed at de-escalating the conflict. Iran’s foreign minister said communication channels with Washington remain open but warned of severe escalation risks if regional attacks intensify. In contrast, comments from US leadership suggested ceasefire discussions were in their final stages, highlighting mixed signals from both sides.

Recent flare-ups in the region, including missile and drone activity, have further added to uncertainty, contributing to concerns about inflationary pressures and sustained higher interest rates. These factors tend to support yields and the US dollar, which in turn weigh on non-yielding assets such as gold.

Attention now turns to the US Nonfarm Payrolls report due later on Friday. Market participants will look for confirmation of labor market resilience, which could reinforce expectations for prolonged higher interest rates and add further pressure on gold in the near term.

Oil prices climbed in Asian trading on Friday after Hezbollah, the Iran-backed militant group, rejected a proposed ceasefire with Israel, further undermining US-led efforts to de-escalate tensions in the Middle East.

Crude benchmarks were on track for weekly gains as geopolitical risks intensified, with renewed clashes between Israel and Hezbollah in Lebanon and continued hostilities involving the US and Iran. The escalation has kept traders focused on potential supply disruptions in a region critical to global energy flows.

Hezbollah’s rejection of the ceasefire proposal and its refusal to withdraw forces from southern Lebanon further complicated diplomatic efforts. Israeli airstrikes in the region continued alongside retaliatory attacks, signaling no immediate path toward de-escalation.

The breakdown in negotiations has also weighed on broader peace expectations, particularly as Iran has previously linked regional ceasefires to any lasting agreement with the US. Reports earlier indicated that indirect US–Iran talks had already stalled amid mutual accusations of violations.

Meanwhile, concerns persist over potential disruptions to energy shipping routes, including the Strait of Hormuz, a key chokepoint for global oil supply. Flows through the passage remain below pre-conflict levels, reinforcing expectations of tighter near-term supply conditions and supporting crude prices.

Wall Street finished Thursday’s session mostly higher, as gains in defensive healthcare stocks and improved sentiment around Middle East de-escalation outweighed weakness in the technology sector following a sharp drop in Broadcom.

The session was marked by a rotation out of high-growth technology names, as investors reassessed lofty expectations around artificial intelligence. Broadcom shares tumbled 12.44% after its earnings guidance failed to match elevated market forecasts, despite strong revenue growth driven by AI chip demand. The weaker outlook also dragged other semiconductor names lower, including AMD, Micron, Arm, and Qualcomm.

Sentiment was also shaped by developments in the Middle East, where reports of a renewed ceasefire between Israel and Lebanon helped ease geopolitical risk premiums. The agreement raised hopes for broader diplomatic progress, including potential US–Iran negotiations, while also contributing to a pullback in oil prices.

Attention now turns to Friday’s US Nonfarm Payrolls report, which is expected to play a key role in shaping expectations for Federal Reserve policy. Strong labor data could reinforce higher-for-longer rate expectations, while a softer reading may support risk assets further and extend the recent equity rally.