Currency markets: The U.S. dollar index rose 0.3 % to 99.52 at 14:58 ET, driven by safe‑haven demand after fresh U.S.–Iran strikes and expectations of higher U.S. rates. The Japanese yen weakened to 160.02 per dollar, touching the psychologically important 160 level for a second consecutive session, prompting intervention warnings from Japanese authorities.
Geopolitical backdrop: The U.S. military reported disabling an unladen oil tanker bound for Iran and repelling multiple Iranian missile and drone attacks on Kuwait and Bahrain; Iran claimed retaliation against the U.S. Fifth Fleet in Bahrain. Iran’s state media said its forces targeted a U.S. base in Bahrain. Iran has proposed a four‑phase roadmap toward a peace deal, beginning with a complete cease‑fire.
Oil and inflation: The escalation lifted crude‑oil prices, heightening inflation concerns. The ISM Services PMI for May rose to 54.5, above expectations, while the overall prices index climbed to 71.3, the highest since August 2022, indicating spreading energy‑cost shocks.
U.S. labor data: ADP’s private‑sector employment report showed 122 000 jobs added in May, the strongest gain since January 2025, with growth in eight of ten sub‑sectors. The data suggest a resilient labor market ahead of the May non‑farm payrolls release.
Monetary policy signals: Higher Treasury yields followed the ADP and ISM releases, reinforcing dollar strength. The Federal Reserve’s Beige Book noted slight‑to‑moderate economic expansion in 10 of 12 districts, giving the Fed room to focus on inflation. In Japan, Prime Minister Sanae Takaichi indicated readiness to intervene if the yen continues to fall, while BOJ Governor Kazuo Ueda said policymakers must weigh a possible rate hike as oil‑price‑driven inflation could overshoot underlying inflation.
Other major currencies: The euro fell 0.3 % to $1.1598 and the British pound slipped 0.4 % to $1.3416.
