08.06.202608:49 Forex Analysis & Reviews: The Fed reacts to the May employment report

It is evident that the May employment report in the U.S. left no one indifferent.

President of the Cleveland Federal Reserve, Beth Hammack, reacted to the data almost immediately — and her comment came as a warning that the market cannot ignore. "If the trend continues, there may soon be a need to take action," she wrote on social media after the data was released.

Hammack is a voting member of the FOMC this year, and her position is consistent. She describes the 4.3% unemployment rate as "roughly consistent with full employment," while the 172,000 increase in jobs, against a forecast of 85,000, confirms that the labor market is in approximate equilibrium. With such a labor market and inflation at 3.8% according to the PCE measure, the arguments for maintaining a wait-and-see position weaken with each new report.

It is worth noting that the May employment data showed the strongest three-month job growth in over two years. The growth spanned a wide range of sectors — leisure and hospitality, healthcare, non-residential construction, and manufacturing. The labor market is not just being sustained — it is regaining momentum after a period of sluggish hiring in 2025, a trend that will further accelerate inflation in the country.

Against this backdrop, Hammack's position fits into the overall hawkish trend within the FOMC, which clearly manifested itself last week. Dallas Fed President Logan stated before the report's release that a rate hike may be necessary by the end of the year. New York Fed President Williams took a neutral stance but did not rule out further tightening. San Francisco Fed President Daly spoke of caution and readiness to react "in any case."

Now, at the meeting on June 16-17 — the first under the leadership of new Chair Kevin Warsh — tensions have risen even further. The main intrigue will not be the decision itself, but the wording in the final statement. The market expects the Fed to abandon wording indicating a rate cut as the next step and to open the door to a rate hike. This signal will determine the dollar's behavior in the near future.

As for the current technical picture of EUR/USD, buyers need to consider how to reclaim the 1.1540 level. Only this will allow targeting a test of 1.1560. From there, it can climb to 1.1580, but doing so without support from major players will be quite challenging. The furthest target will be the high of 1.1600. If the trading instrument declines only to around 1.1505, I expect serious action from major buyers. If no one is there, it would be good to wait for an update on the low at 1.1480, or open long positions from 1.1445.

As for the current technical picture of GBP/USD, pound buyers need to reclaim the nearest resistance at 1.3345. Only this will allow targeting 1.3375, above which it will be quite challenging to break through. The furthest target will be the area of 1.3410. If the pair falls, bears will try to take control over 1.3315. If they succeed, a breakout of the range will deal a serious blow to the bulls' positions and push GBP/USD to a low of 1.3290 with the prospect of moving to 1.3255.