05/06/26

11

The US Bureau of Labor Statistics will publish the May nonfarm payrolls report on Friday at 12:30 GMT, giving markets a fresh look at the health of the labor market at a time when attention has shifted increasingly toward inflation risks and Federal Reserve policy.

With policymakers sounding more hawkish under the new Fed chair, investors will focus less on the headline jobs gain alone and more on the details of the report, including the unemployment rate and wage growth. A weak outcome could still pressure the US Dollar, but only a notably poor reading is likely to materially alter expectations for a tighter policy path later this year.

Economists expect employment to rise by 85,000 in May, following gains of 185,000 in March and 115,000 in April. The unemployment rate is projected to remain at 4.3%, while annual wage growth is expected to slow to 3.4% from 3.6% in April. Some analysts are looking for a softer result, with one forecast calling for just 60,000 new jobs, a slight increase in unemployment to 4.4%, and hourly earnings growth of 0.3% on the month.

Recent private-sector and survey data have painted a mixed picture. The ADP report showed private payrolls rising by 122,000 in May, while manufacturing and services employment gauges from the Institute for Supply Management remained in contraction territory despite some improvement in the manufacturing reading.

For the Federal Reserve, the key issue is whether the labor market is still resilient enough to allow policymakers to keep focusing on inflation. Recent comments from several Fed officials have pointed in that direction, with the labor market described as stable and inflation seen as still too persistent. Markets are also pricing in a roughly 60% chance of at least one 25-basis-point rate increase by the end of 2026.

For EUR/USD, the dollar remains supported by risk aversion and concerns that elevated energy prices could keep inflation sticky. A payrolls figure above 50,000 may be enough to preserve that support and keep the currency pair under pressure. Only a sequence of weak labor-market reports, or a meaningful easing in geopolitical tensions that sharply lowers oil prices, would likely shift the broader outlook against the dollar.

Technically, EUR/USD remains biased lower, with resistance clustered near 1.1680 to 1.1700 and support seen around 1.1580, 1.1500, and the 1.1415 to 1.1400 region.