Investing.com – The US dollar traded largely unchanged in early European trading on Friday as traders awaited the release of key US employment data, while the euro held steady following the European Central Bank’s historic rate cut.
At 05:00 ET (09:00 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was trading flat at 104.060.
Dollar awaits monthly jobs report
The dollar has lagged behind this week, with the index down 0.5% so far this week, as easing labor market conditions in the United States have increased the case for Fed rate cuts this year.
Weekly jobless claims on Thursday came in slightly above last week’s upwardly revised 221,000, supporting this week’s market narrative that the labor market tightness is easing.
Next up is the long awaited monthly magazine.
The world’s largest economy is expected to add 185,000 jobs last month – slightly more than the 175,000 in April, which was the smallest gain in six months. Interest rates are expected to have remained below 4% for the 28th month in a row.
The employment report could provide evidence that the economy is losing steam if it shows that the slowdown in job creation has continued, but an upside surprise could deliver a higher shock to the dollar.
Markets have priced in nearly 50 basis points of Fed rate cuts this year, the first of which are expected to come in September.
Traders are reassessing the ECB’s interest rate cut
fell 0.1% lower to 1.0884, retreating from the 2-1/2 month peak of 1.0916 seen earlier this week as traders assess the European Central Bank’s first since 2019.
At the same time, the central bank raised its inflation forecasts and the president refused to confirm at a press conference that it had entered a phase of ‘rolling back’ its restrictive monetary policy.
“Lagarde’s comments at the press conference – which pointed out the still necessary level of restrictions, the high data dependency and the fact that a Governing Council member opposed yesterday’s rate cut decision – suggested that the ECB has indeed not yet decided on a possible interest rate reduction. next steps,” ING analysts said in a note.
fell marginally to 1.2786, with the pound trading within a tight range ahead of the Bank of England’s next interest rate fix later this month.
Upcoming BOJ ranges for hitting the limits
In Asia, trading was 0.2% lower at 155.33, with the focus squarely on a meeting next week where the central bank is expected to start tapering its bond purchases and tightening policy.
fell slightly to 7.2428 and remained close to a six-month high following the release of the latest Chinese trade data.
China’s economy grew stronger than expected in May, supported by strong industrial production and foreign demand. As a result, the country also recorded a larger than expected surplus.
But China’s grew much weaker than expected, suggesting local demand remained subdued as the broader economy struggled with an uneven economic recovery.
