On Monday, June 8, global stocks witnessed a collective slump in the tech sector, while currency markets remained relatively stable. The US dollar reached a two-month high, fueled by a strong US employment report, prompting traders to increase bets on the Federal Reserve (Fed) raising interest rates this year. On the other hand, the Japanese yen fell back into the intervention danger zone.
The dollar held onto its strong gains following the release of the non-farm payroll report, which showed a much larger-than-expected increase of 172,000 jobs in May.
The euro fell to a two-month low of $1.1517 against the dollar, while the pound dropped to a three-week low of $1.3331. The Australian and New Zealand dollars also slid to their lowest levels in two months.
Additionally, the price of gold dropped by about 5% from around $4,520 on June 1 to about $4,295 on June 8.
Jonas Goltermann, Chief Market Economist at Capital Economics, stated that the US non-farm payroll report depicted a strong labor market despite ongoing impacts on energy prices.
He indicated that the Fed is expected to raise interest rates twice later this year by 0.25 percentage points each time to address energy supply shocks and the strong performance of the US labor market.
Prior to the release of the US non-farm payroll report, many traders had been increasing their bets on a Fed rate hike, citing concerns that global energy crises stemming from Iranian conflicts could exacerbate inflation.
The FedWatch tool from the Chicago Mercantile Exchange (CME) showed that the market currently expects a likelihood of over 70% for a rate hike by December, a significant rise from 45% probability a week earlier.
The strength of the dollar put increased pressure on the yen, with the USD/JPY rate rising to 160.33 at one point. The Japanese government had intervened in the market over a month ago with 11.7 trillion yen (about $730 billion) to push the yen down to a low of 160.725 in July 2024. However, the gains from that intervention have now been completely reversed.
Sources told Reuters that the Bank of Japan is expected to raise rates this month unless a sharp escalation of Middle East conflicts disrupts the markets, given the rise in fuel costs due to energy shocks, putting additional economic pressure on Japan as a whole.
An analyst informed Reuters that as the market has already mostly digested the Bank of Japan’s rate hike strategy, the yen is currently in a dilemma. The market will closely monitor whether the Bank of Japan signals a “faster-than-expected rate hike pace.”
In the cryptocurrency realm, Bitcoin dropped from around $73,661 to about $59,348 between June 1 and June 5, hitting its lowest point since October 2024, before slowly recovering starting June 6. As of 4 p.m. on June 8, the price of Bitcoin was around $63,166.
Moreover, as of 4 p.m. on June 8, the current price of Ether was $1,674, having previously dropped to its lowest point in 14 months in the previous week.
Market analysis suggests that the frenzy around AI stocks and the imminent IPOs of notable new companies like SpaceX have led investors to shift massive amounts of funds from cryptocurrencies to the stock market, ultimately causing a collapse in cryptocurrency prices.
However, the recent dip in tech stocks has shown signs of a resurgence in cryptocurrency prices.