NFP Analysis: US Dollar set to retreat from highs even as America hires the way markets like

America's job market is on fire – I feel a deja-vu when writing that line, as that has been the outcome of Nonfarm Payrolls reports for over a year. The US gained 253,000 positions last month, smashing expectations of an increase of 179,000. Downward revisions to previous months do not diminish the impressive pace of growth.

Workers are also making more money – an increase of 0.5% in Average Hourly Earnings MoM, and a small acceleration in yearly wage growth to 4.4%. That means more inflationary pressures than expected. 

Other impressive figures worth mentioning are a drop of the unemployment rate to a multi-decade low of 3.4%, despite an increase in the participation rate to 62.6%. More people are being drawn to the labor market.

What does it mean for markets? The US Dollar reacted with an instant jump – the data is great, no doubt about that – but I expect the Greenback's gains to fade. Stocks are holding up their gains, which seems like the right reaction.

Why? Earlier this week, the Federal Reserve (Fed) all but announced the end of its rate hiking cycle. Chair Jerome Powell refused to rule out a hike in June entirely, but nothing in this report says "higher rates." The Fed is unlikely to hike rates in June, nor is a recession looking imminent. All in well, at least for now. 

In this environment, the US Dollar is at the bottom of the "smile" while stocks have room to rise, assuming no fresh disaster in US regional banks.