US Dollar stabilizes as NFP boosts sentiment, trade and fiscal risks persist

• The US Dollar edges higher after stronger-than-expected June NFP data boosts sentiment and tempers Fed interest rate cut expectations.
• The US economy added 147,000 jobs in June, while the Unemployment Rate unexpectedly declined to 4.1%.
• US–Vietnam trade deal calms nerves, but July 9 deadline looms with key allies still negotiating.

The US Dollar (USD) edged higher on Thursday after stronger-than-expected Nonfarm Payrolls (NFP) data for June eased some concerns about the labor market. The upbeat report helped lift the Greenback off multi-year lows, as traders reassessed the likelihood of a Federal Reserve (Fed) rate cut in July.

The US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, is hovering near 97.20 during the American trading session, marking a recovery from earlier weakness and snapping a multi-day losing streak. The bounce followed Wednesday’s disappointing ADP Employment Change report. While the ADP data initially fueled dovish expectations, Friday’s stronger NFP print helped stabilize the Dollar and cooled speculation of an immediate Fed rate cut.

The latest US Nonfarm Payrolls (NFP) report came in stronger than expected, with the economy adding 147,000 jobs in June, beating forecasts of 110,000 and slightly above the 144,000 jobs added in May. The Unemployment Rate edged down to 4.1% in June 2025 from 4.2% in May, defying market expectations of a rise to 4.3%.

Building on this cautious mood, the US Dollar has declined by more than 10% over the past six months. The US Dollar remains vulnerable as broader macroeconomic and policy uncertainties increase pressure. Lingering concerns over the US President Donald Trump’s proposed tariffs and an increasingly fragile fiscal situation have dampened investor confidence. The combination of trade policy risks and rising government spending is fueling worries about long-term economic stability, reducing the demand for the Greenback.

• Ahead of the July 9 tariff deadline, a fresh trade agreement between the US and Vietnam helped calm investor nerves, with Washington agreeing to ease tariff pressure in exchange for greater market access for American goods. The deal includes a 20% duty on Vietnamese exports and a 40% tariff on goods rerouted through Vietnam from third countries, notably China. In return, Vietnam will reduce barriers on US goods, allowing certain American products to enter duty-free. The deal, which is softer than the initially proposed 46% blanket tariff, helped ease trade tensions.
• With the July 9 deadline approaching, the US is pushing key allies — including Japan, South Korea, and the European Union — to finalize trade agreements or face steep new tariffs, reportedly as high as 50% on certain imports. While some negotiations have made progress, others remain uncertain. Japan has pushed back firmly, with Prime Minister Shigeru Ishiba stating that Tokyo “will protect national interests at all costs,” signaling resistance to Washington’s demands. Meanwhile, South Korea’s President Lee Jae Myung said on Thursday that negotiations were looking difficult and that he could not say whether talks would conclude by next Tuesday, while German officials are urging swift action to avoid disruptions to vital export sectors. The looming tariff threat is adding to global trade anxiety and keeping markets on edge.
• Trade tensions between the US and China showed signs of easing after Washington lifted key export restrictions on chip design software and ethane shipments. US firms such as Synopsys, Cadence, and Siemens have been allowed to resume sales of Electronic Design Automation (EDA) tools to Chinese clients, while licensing rules on ethane exports were rolled back, reopening a major trade flow that had stalled in June. The policy shift follows China’s move to ease restrictions on rare earth exports, signaling a mutual step toward trade normalization. While broader issues remain unresolved, the latest actions have boosted optimism around US–China relations.
• The sweeping tax‑and‑spending “One Big Beautiful Bill” advanced in the House this week but remains on shaky ground as internal Republican divisions grow. While the bill narrowly cleared a key procedural hurdle with a 219–213 vote, several GOP lawmakers have raised concerns over deep spending cuts, rising deficits, and potential blowback ahead of the November elections. Despite strong pressure from US President Trump, who has urged rapid passage to meet a self-imposed July 4 deadline, opposition from fiscal conservatives could delay or derail final approval. As of press time, the House was still debating the package, and investors are closely watching the outcome, given its potential impact on federal debt levels and broader market sentiment.
• The yield on the US 10-year Treasury note rose nearly 6bps to 4.34% on Thursday after a stronger-than-expected jobs report.
• Alongside the robust NFP print, Weekly Jobless Claims dropped to 233,000, the lowest level in six weeks and below expectations of 240,000, highlighting continued labor market strength. At the same time, Average Hourly Earnings rose by 0.2% in June, slightly below the projected 0.3%, indicating softer wage pressures. While the miss on earnings tempers inflation concerns, the overall resilience in employment data has reduced the urgency for a July Fed rate cut, helping the US Dollar regain ground.
• The Institute of Supply Management (ISM) Services Purchasing Managers’ Index (PMI) rose to 50.8 in June, slightly above market expectations of 50.5 and up from 49.9 in May. The improvement signals renewed expansion in the US services sector, driven by stronger business activity. The New Orders Index surged to 51.3, while Business Activity rose to 54.2. Although the Employment Index remained in contraction at 47.2, the overall uptick indicates ongoing stability in service sector demand.
• Speaking at an economic conference in Germany, Atlanta Fed President Raphael Bostic noted, “The adjustment of prices and the broader economy to changes in trade and other forthcoming policies… is not going to be a short and simple one-time shift in prices, as standard textbook models would suggest.” He added that this could become “a process that may take a year or more to fully play out,” potentially anchoring higher inflation expectations among consumers. With labor market data still showing resilience, Bostic cautioned against rushing to ease policy: “Labor market conditions remain broadly healthy,” and current indicators “are not yet showing signs of the sort of deterioration that might warrant preemptive rate cuts,” reported by Reuters.

Technical analysis: DXY struggles near key resistance after wedge breakdown

The Dollar Index (DXY) recently broke below a descending wedge pattern. After the breakdown, the index is now hovering in a narrow, range-bound phase between roughly 96.40 and 97.15, suggesting a temporary pause in the sell-off. The index is now attempting a mild rebound and appears to be retesting the lower boundary of the broken wedge near 96.80–97.00. This area, which once acted as support, is now acting as resistance. The index is still trading below the 9-day Exponential Moving Average (EMA) at 97.25, reinforcing the bearish setup unless buyers manage to reclaim that level with strong momentum.

Momentum indicators also support the idea of consolidation. The Relative Strength Index (RSI) is sitting near 31.49, indicating weak momentum that is easing slightly from the oversold zone. The Rate of Change (ROC) at -1.98 remains negative, but is flattening out, which aligns with the sideways movement in price. In short, the US Dollar Index is in a range-bound recovery attempt after the breakdown, but without a strong catalyst or bullish follow-through, the risks still lean to the downside. A clean break below 96.60 could resume the downtrend, while a close above 97.25 may hint at short-term stabilization.