DOLLAR INDEX U.S. Dollar Currency IndexTVC:DXYShavyfxhubThe higher-than-expected US Unemployment Claims (247K actual vs. 236K forecast) suggest emerging softness in the labor market, increasing the likelihood of Federal Reserve rate cuts in 2025. Here’s how this data impacts the Fed’s policy outlook: Key Implications for the Fed Labor Market Cooling: The uptick in claims aligns with recent trends of slowing payroll growth (Q1 2025 average: 152K jobs/month vs. Q4 2024: 209K) and a stagnant unemployment rate near 4.2%. Fed projections already anticipate unemployment stabilizing around 4.3% in 2025, but persistent claims increases could signal risks to their "maximum employment" mandate. Rate Cut Probability: The Fed has maintained rates at 4.25–4.50% since May 2025 but emphasized data dependence. Weak labor data strengthens the case for cuts, with markets now pricing in a ~60% chance of a September rate cut (up from ~50% pre-data). The Fed’s March 2025 projections flagged rising unemployment as a risk, with some participants favoring earlier easing if labor conditions deteriorate. Inflation Trade-Off: While unemployment claims rose, wage growth remains elevated (ADP reported 4.5% YoY pay gains in May). The Fed will weigh labor softness against sticky inflation, particularly in services (ISM Prices Paid index at 68.7). A cooling labor market could ease wage pressures, aiding the Fed’s inflation fight and enabling cuts without reigniting price spikes. Market Impact DXY (Dollar Index): Likely to weaken further as rate cut expectations rise. Immediate support at 98.40, with a break targeting 97.00 Equities/Gold: Potential gains as lower rates boost risk assets and non-yielding gold. Bond Yields: 10-year Treasury yields may retreat below 4.40% if markets price in dovish Fed action. What’s Next? June 6 NFP Report: A weak jobs number (