Dollar dips near 8-week low

7 Jun 2024 , 08:44 AM

On Friday, the dollar was trading near an eight-week low ahead of an important U.S. jobs report that could provide some insight into when the Federal Reserve could decrease interest rates.

After the European Central Bank cut rates in a widely anticipated move, the euro held onto its overnight gains, but the prognosis for future easing was clouded by persistent inflation.

The U.S. dollar index, which measures the currency’s value versus the euro and five other major competitors, opened the Asian day little changed at 104.13, not far from this week’s low of 103.99, which was the first time it has fallen below 104 since April 9.

After a string of poorer macro data that revived the possibility of two quarter-point Fed rate cuts this year, the index was headed for a 0.5% decline for the week.

Because of this, traders have positioned themselves for a lower non-farm payrolls report later in the day, raising the possibility that job growth will fall short of the 185,000 analyst consensus expectation.

When the Federal Open Market Committee meets again next week, no changes are anticipated. However, as of right now, markets are pricing in 50 basis points of cuts by the end of December, with the first drop most likely to occur in September.

Following a rise of almost 0.2% in the previous session when the ECB dropped rates by a quarter point to begin its easing cycle, the euro was unchanged at $1.0889. The inflation estimate, which is now anticipated to remain above the central bank’s 2% objective until late next year, was also increased by the staff.

Sterling, meanwhile, was barely moving at $1.2792, not far from the week’s peak of $1.2828, the highest since mid-March.

At 155.85 yen, the dollar saw some moderate trading activity, but it was still on course to lose almost 1% of its value for the week.

Next week, the Bank of Japan will also make policy decisions, and the market is coming to an agreement on an impending drop in the monetary authority’s monthly government bond purchases.

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