The US dollar index or it is also known as DXY lifted to a daily high of 101.77. That was especially after the release of Nonfarm Payroll data yesterday night (5/May). 

However, market participants are also wary of developments in the United States regional banking situation which again shows signs of instability. That is why; they have to see every data released ahead. 

US Nonfarm Payrolls data rose by 253k in April 2023 that is far exceeding the consensus estimate of 180k. The unemployment rate in that country also declined from 3.5% to 3.4% during the same period. 

The Average hourly earnings also grew by 0.5% for month-over-month. It means that the number was faster than the 0.3% growth in the previous period. 

US Employment Data was Compact Green

Yesterday’s night US employment data was compact green. Thus that was providing a positive catalyst that offset the dovish bias in yesterday's FOMC statement. 

As a result, USD strengthened against some major currencies. The American dollar strengthened after strong recruitment and low unemployment alleviated recession fears.

Besides that, the prospect of a rate cut later this year is also becoming a factor. This was said by Joe Manimbo who is known as a senior FX analyst at Convera.

The USD/JPY rate jumped about 0.6% to more than 135.00. Meanwhile, the EUR/USD pair weakened further to the 1.0960s range, tumbling for the second time.

Some US Regional Bank Shares Collapsed 

That was especially after that pair was being hit yesterday by the European Central Bank's interest rate decision. Nevertheless, the buying flow of the USD did not take place widely

It as the market was also wary of symptoms of United States banking turmoil. Shares of several regional banks in that country collapsed yesterday. Shares of Beverly Hills-based bank PacWest down by more than 50%. 

The first Horizon shares from Memphis also collapsed. It was because they canceled a merger plan with TD Bank (Canada) citing high licensing uncertainty. 

Meanwhile, Shares of Arizona-based Western Alliance was also 38% lower. This was after the Financial Times reported it wanted to sell some or all of its business as soon as possible. 

Bank Crisis still Haunts the Investors 

The United States bank crisis continues to haunt investors in the market. This was stated by Chris Beauchamp, an IG's chief market analyst. Besides that, other U.S. banks are under intense pressure.

Once again, this was threatening the financial stability of that country just a day after Jerome Powell declared the condition is healthy enough. Elsewhere, the spot gold edged up by 0.2% to $2042.19 an ounce.

Meanwhile, the gold futures rebounded 0.7% around a high of $2072.49. The XAU/USD chart data or chart also illustrates the strengthening of this commodity prices at $2054.04.

The announcement of the Fed's interest rate hike on Thursday (04/May) early yesterday’s morning had made gold prices soar to an all-time high of $2081. Markets expecting the policy as a final hike flocked to buy this precious metal. 

Dovish Statement Affects on Gold 

However, dovish sentiment that was considered less strong in the Fed's policy statement made gold's rally slightly restrained. In his post-announcement press conference, Powell has not given a clear direction.

It is especially on how the Federal Reserve rate hikes will proceed. The current rate range could be nearing the end of the hiking cycle, but he also left open the possibility of a rate hike if needed. 

Despite the uncertainty, gold prices continued to rally as a number of risks weighed on the US Dollar. First, the economy in America is facing a dilemma between high inflation rates and the banking crisis.

The surge in inflation requires tighter monetary policy. However, it has sent financial markets tumultuous following the collapse of major commercial banks.