Dollar Hits Two-Month High as Strong US Jobs Report Fuels Rate Hike Expectations

The dollar surged to its highest level in nearly two months on June 5, 2026, after a stronger-than-expected US employment report intensified expectations that the Federal Reserve will raise interest rates. The US Dollar Index (DXY) rose 0.7% to 100.06, marking a weekly gain of about 1.2%. Nonfarm payrolls increased by 172,000 in May, well above the 85,000 forecast, while the unemployment rate held at 4.3%. The data, combined with elevated oil prices and persistent inflation, led markets to fully price in a quarter-point rate increase by year-end, according to CME FedWatch. JPMorgan analyst Michael Feroli said the report "practically sealed" a hawkish shift at the upcoming mid-June FOMC meeting, with language hinting at rate cuts likely to be removed. Geopolitical uncertainty added support for the greenback. Middle East ceasefire prospects dimmed after Hezbollah rejected a US-brokered truce as "ridiculous and humiliating." The euro fell 0.7% to $1.1525, pressured by a 0.2% contraction in Eurozone first-quarter GDP, driven by a 12.1% plunge in Ireland. The yen weakened past 160 per dollar.