Investing.com – The U.S. dollar rose in early European trade on Friday but remains on track for a big weekly fall as Federal Reserve Chairman Jerome Powell signaled interest rate cuts in coming months while the euro fell from recent highs after the Central Bank meeting.
At 04:15 ET (0915 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading slightly higher at 102.787, with a weekly loss of about 1% expected. will be equal to 102.787. This is the steepest climb in almost three months.
The dollar faces huge weekly losses
The dollar recovered slightly on Friday after taking a big hit in the previous session following comments from the Fed chief as he wrapped up his two-day appearance before Congress.
“We look forward to greater confidence that inflation is on a sustained path to 2%,” Powell said at a Senate Banking Committee hearing. “When we do have that confidence, and we’re not far off from that, it will be prudent to start reducing the level of restrictions so that we don’t push the economy into recession.”
This has been accepted by markets that the Fed is preparing to turn around, likely in the summer, and so it will take a very large number of jobs later in the session to change sentiment.
The number is forecast to rise by just under 200,000 in February, up from a huge gain of 353,000 in January, while growth is expected to be just 0.2% month-on-month, slowing compared to gains of 0.6% in the previous month.
“The number of jobs will determine the direction of foreign exchange markets today. Following Powell’s testimony, we suspect markets will not be too reluctant to agree prices on further cuts,” ING analysts said in a note.
The euro fell from a nearly two-month high
In Europe, it was down 0.1% at 1.0938, with the euro slightly lower after hitting a nearly two-month high earlier on Friday ahead of the euro zone’s latest quarterly figures.
Data released Friday showed the figure rose 1.0% in January from the previous month, beating the 0.6% rise expected and a significant improvement from a revised 2% fall in the previous month.
The government left the base rate unchanged at 4% and also laid the groundwork for a rate cut in June, similar to what happened overseas.
However, with the Fed funds rate at 5.25%-5.5%, traders believe the Fed has more room to cut aggressively.
“US jobs numbers will determine the direction of EUR/USD: expect some resistance at the key 1.1000 level if the dollar continues to decline today,” ING added.
traded 0.1% higher at 1.2820, with sterling benefiting from dollar weakness, rising more than 1% this week to hit a new 2024 high earlier in the session.
Yen shows strong weekly gains
In Asia, shares traded 0.2% lower at 147.76, with the yen up more than 1.5% this week, its biggest percentage gain since December.
Traders speculate that the Bank of Japan will potentially end negative interest rates in the near future, in direct contrast to the expected movement in US rates.
The yen has weakened for much of the past two years as the Bank of Japan maintained its ultra-loose monetary stance while other major central banks aggressively raised interest rates to curb inflation.
The Australian and New Zealand dollars rose in price over the week by 1.5% and 1.1%, respectively.