Strong US jobs data lifts dollar

LONDON- July 3, 2025: Strong US jobs data sent US Dollar (USD) and Wall Street higher on Thursday, while in Europe, Britain’s bond markets recovered from a renewed burst of debt worries.

The announcement of a deal between the United States and Vietnam ahead of next week’s worldwide U.S. trade tariff deadline encouraged bulls overnight and the robust U.S. jobs numbers saw the dollar double its day’s gains and ensured the S&P 500 and Nasdaq opened at fresh all-time highs.

Nonfarm payrolls increased by 147,000 jobs in June, after rising 144,000 in May, the Labor Department showed on Thursday. Economists polled by Reuters had forecast 110,000 jobs added last month.

The rises in stocks and the dollar were accompanied by a jump in U.S. Treasury yields as traders pushed back Fed rate cut timings.

The 2-year yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 8.9 basis points to 3.88%. The yield on benchmark U.S. 10-year notes rose 4.9 basis points to 4.342%

Seema Shah, Chief Global Strategist, at Principal Asset Management, said the higher than expected payrolls, a drop in the unemployment rate and a fall in jobless claims “completely dispels their case for imminent rate cuts”

It “implies that there is absolutely no urgency for Fed support,” she added, predicting no cuts until late in the year.

The pan-European STOXX 600 index remained 0.4%, higher and kept MSCI’s main 47-country world shares gauge on course for its seventh record high in the last eight sessions.

Britain’s bonds clawed back some of the heavy losses incurred on Wednesday by uncertainty over finance minister Rachel Reeves’ future, but remained weaker than recent levels.

The 20-year gilt yield, which is a proxy of longer term UK government borrowing costs, eased by 8 basis points after its biggest spike on Wednesday since October 2022 – during the ill-fated premiership of Liz Truss.

A tearful appearance from Reeves in parliament had sparked questions about her future and Britain’s public finances after the government was forced to ditch billions of pounds worth of welfare spending cuts.

“Some worries remain about the government being backed into a corner and losing its grip on the public finances,” said Susannah Streeter, head of money and markets at broker Hargreaves Lansdown.

Analysts had been watching the payrolls data closely after a private sector payrolls report on Wednesday had surprised with the first fall in over two years.

Traders were also waiting to see if U.S. President Donald Trump’s tax and spending bill gets passed by Congress later. The bill is expected to add $3.3 trillion to the United States’ $36 trillion of national debt over the next decade, according to nonpartisan analysts.

DING DONG

Overnight the U.S. said it had struck a trade deal with Vietnam, including a 20% tariff on exports to the U.S.. That is lower than the 46% tariff that had been threatened, but still much higher than previous rates.

Vietnamese shares gained 0.5% to the highest since April 2022 although the local dong currency hit a record low of 26,229 per dollar.

“More trade deals may soon be announced, but the 20% tariff agreed with Vietnam does not augur well, and that or even higher could become the norm for some including Europe and Japan,” said Shane Oliver, chief economist at AMP.

Indeed, Japan has invoked national interests as talks with the U.S. struggled, while South Korean President Lee Jae Myung said on Thursday U.S. tariff negotiations were looking difficult and he could not say if talks could conclude by next Tuesday.

MSCI’s broadest index of Asia-Pacific shares closed up 0.3% higher. China’s blue-chip index rose 0.6% after limp services data bolstered expectations of more stimulus, while Japan’s Nikkei finished flat.

Despite its payrolls boost, the dollar was still just above a three-year low. Sterling was in danger of stalling again though at $1.3640 after its 0.8% fall on Wednesday.

Futures imply less than 25% probability for a rate cut this month from the Fed, which has not eased policy at all this year, drawing the ire of Trump, who reiterated his call on Wednesday for Chair Jerome Powell to resign.

Trump, who said rates should be cut to 1% from the current Fed benchmark of 4.25% to 4.50%, has repeatedly railed against Powell for not lowering borrowing costs since his return to the White House in January.

A UBS survey on Thursday showed two in three reserve managers fear Fed independence is at risk and nearly half think the rule of law in the U.S. may deteriorate enough to influence their asset allocation significantly.

In commodities markets, oil prices were lower after jumping 3% overnight as Iran suspended cooperation with the U.N. nuclear watchdog.

Brent crude futures slipped 0.8% to $68.64 per barrel, while U.S. crude was 0.7% lower on the day. Gold prices also dipped, easing 0.1% to $3,352 an ounce.