The US dollar saw a slight increase on Friday, with traders exercising caution ahead of the highly anticipated monthly jobs report, while the euro continued to weaken.
At 05:00 ET (10:00 GMT), the Dollar Index, which measures the greenback against a basket of six other currencies, was up 0.1% at 105.827, near three-week lows after falling 0.6% overnight.
Payrolls Could Influence Dollar’s Direction
Dollar bulls have been somewhat restrained this week, as data on private payrolls and weekly jobless claims pointed to a cooling labor market, suggesting that the Federal Reserve may have room to lower interest rates further. However, Fed Chair Jerome Powell recently stated that the US economy is stronger than expected, contrary to the central bank’s September forecast when it began reducing rates.
Although the market still anticipates a rate cut in December, the official jobs report later in the day could affect the dollar’s trajectory. Forecasts suggest an increase of around 200,000 jobs in November, recovering from October’s modest 12,000 gain impacted by hurricanes. The unemployment rate is expected to rise slightly to 4.2% from 4.1%.
“The market remains long on the dollar after two months of gains fueled by Trump’s policies. While investors are optimistic about the dollar’s performance in 2025, today’s jobs report presents a potential risk for those positions,” analysts at ING noted.
Euro Pressured by Weak German Data
Meanwhile, the euro weakened, with EUR/USD dropping 0.1% to 1.0575. This decline was driven by disappointing German industrial production data, which showed an unexpected 1.0% fall in October, signaling further weakness in the eurozone’s largest economy. The German economy ministry stated that the industrial sector is still in downturn.
The eurozone grew by just 0.4% in Q3 on a quarterly basis, with an annual gain of 0.9%, signaling sluggish economic growth. This raises expectations for another rate cut by the European Central Bank next week, with markets pricing in over 150 basis points of easing by the end of 2025.
In addition, traders are also factoring in political instability in France, as Prime Minister Michel Barnier lost a no-confidence vote earlier in the week. President Emmanuel Macron is expected to appoint a new prime minister soon, but this has created uncertainty about the country’s ability to reduce its budget deficit. Standard & Poor’s warned that the likelihood of passing an amended 2025 budget before year-end is low.
GBP/USD Moves Higher
GBP/USD rose by 0.1% to 1.2763, supported by data showing UK house prices rose for the fifth consecutive month in November. Mortgage lender Halifax reported a 1.3% increase in prices for the month, the largest jump this year, pushing the annual growth rate to 4.8%, the highest since November 2022.
Asian Currencies Steady
In Asia, most currencies remained subdued ahead of the US jobs data. USD/JPY gained 0.3% to 150.57, USD/CNY rose 0.2% to 7.2709, and AUD/USD dropped 0.4% to 0.6426.
USD/KRW rose 0.5% to 1,419.96, marking a 1.8% increase for the week, the largest since early April, following President Yoon Suk-Yeol’s failed attempt to impose martial law.
USD/INR edged down slightly to 84.680 after the Reserve Bank of India kept its benchmark interest rates unchanged, as expected, but reduced the cash reserve ratio requirement for local banks. The central bank also revised its economic growth forecast downward and raised its inflation estimate.
