US dollar retreats, but off lows, after solid jobs report

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The U.S. dollar fell on Friday, but trimmed losses against the euro and yen, after data showed the world's largest economy added more new jobs than expected last month, reflecting a labor market that remained on stable footing.

Gains in the greenback came after rising for most of the week against both the euro and yen, as optimism grew about the prospect of tariff deals with many U.S. trading partners including China.

The jobs report, meanwhile, reinforced expectations that the Federal Reserve will hold interest rates steady for the next few meetings and not cut them until probably the summer.

U.S. data showed nonfarm payrolls increased by 177,000 jobs last month after rising by a downwardly revised 185,000 in March. Economists polled by Reuters had forecast 130,000 jobs added last month after a previously reported 228,000 gains in March.

The report, however, does not reflect the full impact of the tariffs imposed on the so-called Liberation Day on April 2. Economists expect jobs growth to slow in the coming months once the fallout from the punitive tariffs is taken into account.

"Today's jobs report likely allows the Fed to take a more patient approach to rate cuts this year," said Jason Pride, chief of investment research & strategy, at Glenmede in Philadelphia.

"Facing tariff-driven stagflation risks, the Fed is trying to gauge in real time whether the 'stag' or the 'flation' is the bigger risk to the outlook. The ongoing health of the labor market may reassure the Fed that the bottom is not falling out of the economy for the time being, which affords it some more time to assess the impact of tariffs on inflation."

Aside from the jobs report, tariffs remained front and center on investors' minds.

U.S. Secretary of State Marco Rubio told Fox News late on Thursday that talks with China will come up soon. His comments followed a Chinese state media report seen as a signal of Beijing's openness to trade negotiations.

Beijing was "evaluating" an offer from Washington to hold talks over Trump's tariffs, China's Commerce Ministry said on Friday.

It is also considering ways to address the Trump administration's concerns about China's role in the fentanyl trade, potentially providing an off-ramp from hostilities to allow trade talks to start, the Wall Street Journal reported on Friday.

"Market optimism is building in anticipation of upcoming trade deals and as hard data have not yet weakened in line with much softer survey data," wrote Citi analysts in their latest research note.

"Activity data could look strong for a few more months due to front-loading, with a drop in spending and increasing layoffs later in the summer."

Separately, Japan's top trade negotiator, Ryosei Akazawa, said he deepened talks on trade, non-tariff measures and economic security cooperation with U.S. Treasury Secretary Scott Bessent in Washington on Thursday.

And Finance Minister Katsunobu Kato said Japan could use its $1 trillion-plus holdings of U.S. Treasuries as leverage in trade talks with Washington.

Following the jobs report, the dollar cut some of its losses against the yen, still trading lower on the day. It was last down 0.3% at 145.05 yen, but on track to rise for a second straight week.

The euro, meanwhile, pared gains versus the greenback, still trading higher at $1.1326, up 0.3%. On the week, however, it was down 0.5%, the largest weekly loss since mid-March.

Sterling was flat against the dollar at $1.3280, but fell 0.3% on the week, its biggest weekly decline since late February.

The China-exposed Australian dollar surged 1% to US$0.6449.

Post-jobs data, the U.S. rate futures market slashed bets that the Fed will cut rates as soon as June, giving it a 35.6% probability. That was down from about 58% late on Thursday.

Overall, the market has reduced the size of rate cuts being priced in to 80 basis points (bps), or about three rate reductions of 25 bps each. Over the last few days, rate futures had factored in about 100 bps of easing.

Currency              

bid

prices at

2 May​

08:03

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 99.987 100.14 -0.14% -7.84% 100.32 99.3

index 94

Euro/Doll 1.1304 1.1291 0.13% 9.2% $1.1382 $1.1

ar 275

Dollar/Ye 145.02 145.4 -0.24% -7.82% 145.91 143.

n 78

Euro/Yen 163.95​ 164.17 -0.13% 0.45% 164.63 163.

47

Dollar/Sw 0.8266 0.8295 -0.33% -8.89% 0.8316 0.82

iss 06

Sterling/ 1.3277 1.3277 0% 6.16% $1.333 $1.3

Dollar 265​

Dollar/Ca 1.3808 1.3854 -0.32% -3.97% 1.3854 1.37

nadian 61

Aussie/Do 0.6448 0.6383 1.03% 4.22% $0.647 $0.6

llar 382

Euro/Swis 0.9342 0.9359 -0.18% -0.54% 0.9384 0.93

s 13

Euro/Ster 0.8511 0.8501 0.12% 2.88% 0.854 0.84

ling 91

NZ 0.5947 0.5908 0.68% 6.29% $0.5977 0.59

Dollar/Do 04

llar

Dollar/No 10.3979​ 10.4119 -0.13% -8.52% 10.4507 10.3

rway 285

Euro/Norw 11.7599 11.7589 0.01% -0.08% 11.8048 11.7

ay 206

Dollar/Sw 9.6464 9.7258 -0.82% -12.44% 9.766 9.59

eden 1

Euro/Swed 10.9116 10.9989 -0.79% -4.84% 11.0206 10.8

en 929

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Suzanne McGee in Rhode Island and Alun John in London; Editing by Mark Potter, Susan Fenton and Daniel Wallis)