Investing.com – The U.S. dollar fell slightly on Friday, coming off a six-week high ahead of a key jobs report that could determine sentiment heading into the Federal Reserve's next meeting.
At 4:25 a.m. ET (8:25 p.m. Japan time), the dollar index against a basket of six other currencies was trading 0.1% lower at 101.667, just off the previous session's six-week high.
For the week, the index rose nearly 1.5%, its best performance since April.
Payroll calculation that guides dollar movements
This week, the dollar was boosted by safe-haven demand in light of escalating tensions in the Middle East and its potential impact on the global economy, as well as fairly healthy labor data (weekly and weekly).
All eyes are now on the release of the September report, which is likely to influence market expectations for further interest rate cuts by the Federal Reserve.
The U.S. economy is expected to maintain a moderate pace of job growth, with payrolls increasing by 147,000 in the final month of the third quarter, on par with August's 4.2% level. I am.
ING is slightly more pessimistic than consensus, forecasting 115,000 jobs and a 4.3% unemployment rate.
“That probably doesn't change the Fed's situation, though. It will still cut rates by 25 basis points in November and should stick to 50 basis points for now,” ING analysts said in a note. “However, we have already seen some hawkish revaluation in the USD OIS curve this week, and the dollar could correct lower on the slightly softer jobs report.”
ECB weakens euro as it looks to further cut interest rates
In Europe, the euro fell by more than 1% this week to 1.1027, as further signs of slowing inflation in the euro zone overshadowed strengthening activity indicators and growth in France.
The European Central Bank has already started cutting interest rates, and normally hawkish policymaker Isabel Schnabel took a dovish stance earlier in the week, raising hopes for further rate cuts later this month. has increased.
ING added: “We maintain a moderate bearish bias on EUR/USD in the near term, even though our baseline expectation of higher US unemployment should take a breather today.”
“Ultimately, EUR/USD could remain under pressure due to less supportive interest rate differentials, volatility in risk sentiment, and disruption to the EU budget season. If it breaks below, the correction could extend to 1.09 relatively quickly.
The index rebounded slightly to 0.2% after falling 1% on Thursday after Bank of England Governor Andrew Bailey said the central bank could cut interest rates aggressively if inflation pressures continue to ease. It rose to 1.3154.
Sterling is on the rise, still up more than 3% this year, largely on expectations that the BoE will keep interest rates higher for longer than the Federal Reserve while inflation remains high.
Policy uncertainty hits the yen
Amid uncertainty over the future of the Bank of Japan's monetary policy, the index rose to a six-week low of 147.25 the previous day, but fell 0.4% to 146.28.
Despite today's gains, the yen is still down nearly 3% this week after new Prime Minister Shigeru Ishiba's comments fueled expectations that Japan's interest rate hikes could be further down the road.
The Chinese market was closed until Tuesday for Golden Week, so the index remained almost unchanged at 7.0185.
