On Thursday, the U.S. dollar held steady near its lowest level in over three years as investors prepared for the release of the crucial U.S. monthly jobs report, a key factor that could shape the Federal Reserve’s upcoming policy decisions.
At 04:00 ET (08:00 GMT), the Dollar Index, which tracks the dollar’s performance against six major currencies, was largely flat at 96.420, remaining close to its multi-year lows. The dollar is set to close the week down roughly 0.5%.
Focus on U.S. Payroll Data
Despite headlines including President Trump’s announcement of a trade agreement with Vietnam and Republican efforts to push forward a significant tax cut plan in the House, the dollar saw little movement as market participants concentrated on Thursday’s jobs data. Economists predict an increase of about 110,000 new jobs for June, a slowdown compared to May’s 139,000, but concerns linger following Wednesday’s report showing the first drop in private payrolls in over two years.
With inflation appearing manageable and the labor market in focus, investors are keenly awaiting clues on whether the Fed will maintain its current stance or cut interest rates at its July meeting.
Analysts from ING noted, “Fed Chair Jerome Powell, who currently leans towards steady rates, cites persistent inflation and a solid labor market as reasons to keep rates in the 4.25%-4.50% range for now. However, a weaker jobs report could increase the likelihood of a July rate cut, which the market currently prices at about 26%.”
Sterling Recovers from Earlier Decline
In Europe, the euro nudged up 0.1% to 1.1806 against the dollar, nearing highs last seen in September 2021. Upcoming Eurozone service sector data could sway sentiment, but the main market mover remains the U.S. employment figures.
The European Central Bank recently cut interest rates for the eighth time in a year, lowering the deposit rate to 2%, and signaled it might hold rates steady at its next meeting. IMF Europe chief Alfred Kammer stated Wednesday at the ECB Forum in Sintra, Portugal, that the ECB should maintain its current approach unless new inflation data prompt a change.
“Inflation risks in the eurozone are balanced,” Kammer said. “We expect the ECB to keep rates steady at 2% barring any major inflation shocks, which currently seem unlikely.”
Meanwhile, the British pound bounced back 0.2% to 1.3665 after falling nearly 1% the previous day amid worries about UK fiscal policy due to government delays on welfare reforms.
“Markets briefly feared Chancellor Rachel Reeves might step down amid fiscal uncertainty,” said ING analysts. “Prime Minister Keir Starmer may have misread Parliament and market sentiment initially but has since provided support. The UK faces significant fiscal challenges ahead of its November budget.”
Asian Currencies Show Little Change
In Asia, the dollar remained stable against the yen at 143.88 as traders stayed cautious amid ongoing U.S. trade negotiations. The dollar eased slightly against the Chinese yuan, trading at 7.1621, following weaker-than-expected private sector service data for June—though growth has now continued for 30 consecutive months.
The yuan appeared mostly unaffected by recent announcements from major chipmakers that some U.S. export restrictions to China have been eased immediately, signaling improving trade relations shortly after the two countries agreed on a trade framework.