Investing.com - The US dollar steadied Friday ahead of the release of the keenly-watched US monthly jobs report, while sterling gained in the wake of the Bank of England’s latest policy-setting meeting.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 107.465, and remained far below Monday’s high of 109.88.
Dollar in tight range
The US currency moved in a tight range Friday, after a volatile week dominated by market-moving headlines on US tariffs, as traders cautiously awaited the release of the latest payrolls release for more cues on potential monetary policy easing by the Federal Reserve going forward.
The US economy tipped to have added 154,000 roles in January, after surging 256,000 in the prior month, while the unemployment rate is seen matching December’s pace of 4.1%.
“A lot of focus will be on annual benchmark revisions. Last year’s provisional revisions indicated that, upon cross-referencing with tax data, the Bureau of Labor Statistics had overestimated job creation by approximately one-third. This points to significant issues with their model, and we anticipate substantial adjustments to the monthly payroll numbers,” said analysts at ING, in a note.
Strength in the labor market gives the Federal Reserve more headroom to keep interest rates at high levels for longer - a scenario that weighs on growth in the world’s largest economy.
Sterling rebounds after BOE cut
In Europe, GBP/USD traded 0.2% higher to 1.2464, with sterling bouncing a touch after dropping as low as 1.2370 on Thursday in the wake of the Bank of England cutting interest rates by a quarter of a percentage point.
The cut to 4.5% was in line with economists’ expectations, but two officials called for a bigger rate cut against a backdrop of weaker growth, with the central bank halving its 2025 growth outlook in its official projections.
EUR/USD traded 0.1% higher at 1.0397, with the euro gaining despite data showing the German economy remained in trouble.
Industrial production in the eurozone’s largest economy fell more than expected, decreasing by 2.4% compared with the previous month.
“When adding downside risks for US payrolls, we favor a new leg higher in EUR/USD to retest the 1.044 Wednesday highs,” added ING.
Yen supported by hike expectations
In Asia, USD/JPY traded 0.3% higher to 151.80, with the pair still on course to drop over 2% this week - its biggest weekly fall since November.
The Japanese currency was buoyed chiefly by increased bets that the BOJ will have enough impetus to raise interest rates even further in the coming months. Strong wage and household spending data factored into these expectations, as did hawkish comments from some BOJ board members.
The BOJ is expected to raise rates by at least 50 basis points, bringing them to 1% by end-2025.
USD/CNY drifted lower to 7.2871, with the onshore yuan weaker as onshore markets reopened from the Lunar New Year holiday this week, weighed by the onset of renewed trade tensions between the US and China.
Markets were watching for any dialogue between US President Donald Trump and his Chinese counterpart Xi Jinping.