Investing.com – The US dollar rose on Friday, holding on to recent gains ahead of the release of the highly influential monthly jobs report, while sterling continued to retreat.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 109.040, on track for a weekly gain of 0.3%.
This would be the sixth consecutive weekly gain, the longest streak since an eleven-week streak in 2023.
The dollar retains its strength ahead of payrolls
The dollar traded around its strongest level since November 2022, holding on to recent gains as the US returned from a holiday honoring former President Jimmy Carter.
The focus has been squarely on the December data, due later in the session, as traders look for more signals about the US economy and the future path of interest rates.
The Fed’s December meeting, released on Wednesday, showed that policymakers remain concerned about the possibility of a resurgence of inflation, especially given the likely impact of expansionary and protectionist policies under newly-elected President Donald Trump.
US nonfarm payrolls data show the economy added 154,000 jobs in December, on top of 227,000 in November, at a rate of 4.2%.
Anything stronger would strengthen the case for fewer Federal Reserve rate cuts in 2025, boosting the dollar.
“We think the balance of risk for the dollar has turned to the upside today as robust employment data could prompt markets to price out a rate cut in March and possibly extend the first rate move beyond June,” ING analysts said. remark.
“We would still argue that with concerns about inflation rising again — although Fedspeak has been quite heterogeneous on that topic — next Wednesday’s CPI report could have deeper implications for the market.”
Sterling is facing a significant weekly loss
In Europe, yields rose to 1.0303, helped by data showing rates rose 0.2% from November, an improvement from the previous month’s 0.3% decline and above expectations decrease of 0.1%.
That said, the euro remains weak, with the European Central Bank widely expected to cut rates by around 100 basis points in 2025, around double the rate cuts expected by the US central bank, while the regional economy remains very weak .
“Markets are pricing a host of negative factors into the euro at this stage, and the euro may be less punished than other G10 currencies if US payrolls perform strongly today,” ING said.
traded 0.2% lower at 1.2285, with the pound on course to lose 1% this week, after earlier falling to a 14-month low following a sell-off in UK government bonds amid worries about the UK finance.
“We expect higher rates to pose additional headwinds to growth via household remortgaging and weaker investment,” Goldman Sachs analysts said in a note.
“The rise in government bond yields reinforces our view that UK growth will disappoint in 2025, with our real GDP growth forecast of 0.9% significantly below consensus (1.4%), the BoE (1, 5%) and the OBR (2%) will lie.”
Yuan has no support
In Asia, yields rose 0.3% to 7.3513, with the Chinese currency seeing continued weakness after soft December inflation data released earlier this week.
The prospect of trade tariffs under Trump also soured sentiment toward China.
fell 0.1% to 157.85, with the Japanese currency helped by the release of stronger-than-expected data earlier Friday.
This followed a bigger-than-expected rise in wage growth on Thursday, and led to more speculation about a January rate hike by the Bank of Japan.
