Investing.com – The US dollar fell slightly on Friday, falling from a six-week high ahead of a key jobs report that could determine sentiment ahead of the Federal Reserve’s next meeting.
At 04:25 ET (08:25 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, fell 0.1% to 101.667, off a six-week high in the previous session.
The index rose by about 1.5% during the week, its strongest performance since April.
Payrolls to guide dollar movements
The dollar received support this week thanks to reasonably good – and weekly – labor data as well as safe haven demand given the widening tensions in the Middle East and the potential impact on the global economy.
Attention now turns to the publication of the September report, which will likely guide market expectations for further interest rate cuts by the Fed.
The US economy is expected to maintain a moderate pace of job growth during the final month of the third quarter, with payrolls rising by 147,000, while this is expected to be in line with August’s level of 4.2%.
ING appears slightly more pessimistic than the consensus, forecasting 115,000 for payrolls and 4.3% for the unemployment rate.
“This probably does not change the picture for the Fed, which should cut by 25 basis points in November and is holding back by 50 basis points at the moment,” ING analysts said in a note. “However, some hardening repricing has already occurred in the USD OIS curve this week, and the dollar could correct lower on the back of a slightly weaker jobs report.”
Euro weakens as ECB sees further easing
In Europe, the euro fell to 1.1027, with the euro falling more than 1% this week amid further signs of slowing inflation in the euro zone casting a shadow over strengthening activity data and French growth.
The European Central Bank has already begun cutting interest rates, and Isabel Schnabel, usually a hawkish policymaker, took a more dovish stance earlier in the week, raising expectations of another rate cut later this month.
“We maintain a moderate bearish bias for EUR/USD in the near term, even if our fundamental outlook for higher US unemployment should provide a respite today,” ING added.
“Ultimately, less supportive spreads, unstable risk appetite, and a turbulent EU budget season mean that EUR/USD could remain under pressure. The 1.1000 level represents major support, so a break lower could mean that the correction extends.” to 1.09 relatively quickly.”
It rose 0.2% to 1.3154, rebounding slightly from a 1% drop on Thursday after Bank of England Governor Andrew Bailey said the central bank may cut interest rates aggressively if inflationary pressures continue to ease.
Sterling has been on the rise, and is still up more than 3% this year, largely due to expectations that the Bank of England will keep interest rates higher for longer than the Fed while inflation remains steady.
Political uncertainty hits the yen
The index fell 0.4% to 146.28, after rising to its lowest level in more than six weeks at 147.25 the previous day, amid uncertainty over the Bank of Japan’s future monetary policy.
Despite today’s gains, the yen is still on track to drop by nearly 3% this week after comments from new Prime Minister Shigeru Ishiba reinforced expectations that a rate hike in Japan is still a long way off.
It was largely unchanged at 7.0185, with Chinese markets now closed until Tuesday as the country celebrates Golden Week.
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