2026-05-11 · generated by deepseek-v4-flash

Dollar Holds Steady as Jobs Beat, Revisions and Geopolitical Risks Cross

US April nonfarm payrolls surged 115k, beating expectations, but prior months were revised down 16k. Michigan inflation expectations eased. Middle East tensions escalated with Iran-US clashes. The dollar index consolidated as markets digested mixed signals.

Dollar: Mixed Labor Market Data and Fed Speak

The US dollar traded in a tight range on Monday as investors weighed a strong April nonfarm payrolls print against downward revisions to prior months. The headline figure of 115,000 new jobs easily beat consensus, but the Bureau of Labor Statistics revised February and March lower by a net 16,000. Meanwhile, the University of Michigan's preliminary May reading showed the one-year inflation expectation at 4.5%, below the 4.8% forecast and the prior 4.7%, suggesting some easing in price pressures. Chicago Fed President Austan Goolsbee reiterated that rate cuts remain conditional on inflation progress, which has yet to materialize. Bank of America revised its forecast sharply, now seeing no Fed rate cut until 2027 due to persistent inflation and a strong labor market.

EUR/USD: ECB Officials Flag AI Risks and Energy Price Threats

EUR/USD remained subdued around 1.0850 as European Central Bank policymakers struck cautious tones. ECB Governing Council member José Luis Escrivá warned that artificial intelligence risks are prompting a review of financial infrastructure resilience, while also emphasizing the central bank's role as the ultimate guarantor for stablecoin risks. Separately, Bundesbank President Joachim Nagel stated that the ECB will take necessary measures to control energy price-induced inflation. The contrasting messages left the pair directionless, with the focus shifting to upcoming eurozone data.

USD/JPY: Geopolitical Safe-Haven Flows and Yield Differentials

USD/JPY edged lower to 134.50 as safe-haven demand supported the yen amid escalating geopolitical tensions. Iran's armed forces engaged in sporadic clashes with US vessels in the Strait of Hormuz, and the UK announced the deployment of a destroyer to the region. The downbeat Michigan inflation expectations weighed on US Treasury yields, narrowing the yield differential that favors the dollar. Markets are also monitoring the Bank of Japan's stance, though no new signals emerged from Tokyo today.

USD/CNY: Offshore Yuan Strengthens on Policy Easing and Trade Data

The offshore yuan (CNH) strengthened 116 pips against the dollar to 6.7971, while the onshore yuan (CNY) closed at 6.8005, up 63 pips from Thursday's night session. The moves followed the implementation of two pilot foreign exchange facilitation policies in the Qianhai Free Trade Zone, with the first transactions already completed. Additionally, Jiangsu province reported a 17.2% YoY increase in first-quarter foreign trade, exceeding the national average, while Chongqing's cross-border yuan settlement for goods reached 85.05 billion yuan, the highest among central and western regions. The positive trade data and continued capital account liberalization are providing support for the yuan.

Geopolitical Risks: Tensions Flare in the Middle East

Geopolitical risks remain elevated. In addition to the Iran-US clashes in the Hormuz Strait, Iran is drafting legislation on the strait's legal regime. Russian President Putin stated that the conflict in Ukraine is moving towards an end, while former President Trump said he expects an Iranian response to a US peace proposal soon. The Federal Reserve's latest survey identified geopolitical conflict and oil supply disruptions as the top risks to US financial stability, with a sharp rise in concern levels. These developments are keeping risk appetite in check and supporting safe-haven currencies like the yen and Swiss franc.