Dollar Holds Steady, Euro Pauses After ECB Rate Cut as U.S. Jobs Data Looms

The U.S. dollar remained stable in early European trading on Friday as traders awaited the release of crucial U.S. employment data, while the euro steadied following the European Central Bank’s (ECB) historic rate cut.

At 05:00 ET, the Dollar Index, tracking the greenback against a basket of six other currencies, remained flat at 104.060. The dollar has been on the back foot this week, with the index down 0.5%, as easing labor market conditions in the United States fueled expectations for Fed rate cuts later this year.

Investors are now focused on the upcoming monthly jobs report, which is expected to provide further insights into the labor market’s health. While job growth is projected to remain moderate, a significant slowdown could further support the case for Fed rate cuts.

Meanwhile, the euro slipped 0.1% to 1.0884, retreating from its recent 2-1/2 month peak of 1.0916 following the ECB’s first interest rate cut since 2019. However, the central bank also raised its inflation forecasts, and President Christine Lagarde declined to confirm a shift towards easing monetary policy.

Sterling also edged lower to 1.2786 as traders anticipated the Bank of England’s rate-setting meeting later this month.

In Asia, the USD/JPY pair traded 0.2% lower at 155.33, with the focus shifting to the Bank of Japan’s upcoming meeting, where the central bank is expected to begin tapering its bond purchases.

USD/CNY slipped slightly to 7.2428, remaining close to six-month highs after China released its latest trade data. While exports grew more than expected, imports grew at a much weaker pace, indicating subdued domestic demand as the Chinese economy continues to face challenges in its recovery.

Overall, the currency markets are experiencing a period of anticipation as investors await the release of U.S. employment data and further insights into the policy directions of major central banks. The upcoming reports could significantly impact market sentiment and the future trajectory of currency pairs.