US Dollar Marginally Higher Ahead of Jobs Report; Euro Weakens on German Data

The US dollar edged higher on Friday as traders adopted a cautious approach ahead of the release of the US monthly jobs report, while the euro remained under pressure due to weak German industrial data and ongoing political uncertainty in France. At 05:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six major currencies, rose 0.1% to 105.827, rebounding from overnight losses that brought it to near three-week lows. The greenback has experienced restrained gains this week following data that suggested a softening labor market. Private payrolls and weekly jobless claims indicated some weakening, bolstering the Federal Reserve’s ability to implement further interest rate cuts. However, comments earlier this week from Fed Chair Jerome Powell highlighted the surprising strength of the US economy, raising questions about the central bank’s next moves.

Market attention is now firmly on the November nonfarm payrolls report, due later on Friday, which is expected to show a rebound of 200,000 new jobs after October’s hurricane-impacted increase of just 12,000. The unemployment rate is forecast to edge slightly higher to 4.2%. The data will play a critical role in shaping expectations for a potential rate cut in December, with traders already pricing in such a move. ING analysts noted that the market remains broadly supportive of the dollar over the long term, but cautioned that the payrolls data poses a risk to bullish positions and could lead to short-term volatility.

The euro, meanwhile, weakened further, with EUR/USD trading 0.1% lower at 1.0575, as disappointing German industrial production figures compounded concerns over the health of the eurozone economy. German industrial output fell by 1.0% in October, following a downwardly revised 2.0% decline in September. The downturn underscores persistent challenges in Europe’s largest economy, adding to fears of a protracted industrial slowdown. Broader eurozone growth remains tepid, with the bloc recording a 0.4% quarterly expansion in the third quarter, translating to an annual growth rate of just 0.9%. These figures are expected to intensify calls for further monetary easing by the European Central Bank, with markets pricing in over 150 basis points of rate cuts by the end of 2025.

Political instability in France has added to the euro’s woes. President Emmanuel Macron is set to appoint a new prime minister after the government of Michel Barnier fell to a no-confidence vote. The political turmoil leaves France grappling with fiscal challenges, with credit rating agencies expressing concerns over the country’s ability to chart a clear path to reduce its budget deficit. Standard & Poor’s issued a warning on Thursday about the implications of the ongoing uncertainty, further weighing on investor sentiment.

While the US dollar benefits from its position as a safe haven amid global uncertainties, the euro remains vulnerable to both weak economic fundamentals and political headwinds. Market participants will closely monitor the US jobs report later today for further cues on the Federal Reserve’s trajectory, while developments in the eurozone continue to point to a challenging road ahead for the single currency.