Investing.com – The US dollar edged higher Friday, holding on to recent gains ahead of the release of the highly influential monthly jobs report, while sterling continued to retreat.

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 109.040, on course for a weekly gain of 0.3%.

This would be its sixth consecutive weekly gain, its longest run since an 11-week streak in 2023. 

Dollar retains strength ahead of payrolls 

The dollar traded near its strongest levels since November 2022, holding on to recent gains as the US returned from a holiday to honor former President Jimmy Carter.

The focus was squarely on data for December, due later in the session, as traders look for more cues on the US economy and the future path of interest rates. 

The of the Fed’s December meeting, released on Wednesday, showed policy makers remain concerned over the potential for inflation to flare up again, especially given the likely impact of the expansionary and protectionist policies under President-elect Donald Trump.

US nonfarm payrolls data is expected to show the economy added 154,000 jobs in December on top of the 227,000 in November, with holding at 4.2%.

Anything stronger would add to the case for fewer Federal Reserve rate cuts in 2025, boosting the dollar.

“We think the balance of risks is tilted to the upside for the dollar today, as robust jobs figures could prompt markets to price out a March cut and potentially push the first fully-priced move beyond June,” said analysts at ING, in a note.

“We would still argue that with inflation concerns back on the rise – although the Fedspeak has been quite heterogeneous on that topic – next Wednesday’s CPI report could have deeper market ramifications.”

Sterling set for hefty weekly loss

In Europe, edged higher to 1.0303, helped by data showing that rose 0.2% on the month in November, an improvement from the prior month’s drop of 0.3% and above the fall of 0.1% expected.

That said, the euro remains weak, with the European Central Bank widely expected to ease interest rates by around 100 basis points in 2025, around double the cuts expected by the US central bank, with the regional economy still very weak.

“Markets are pricing a good deal of negatives into the euro at this stage, and perhaps the euro may be penalised less than other G10 currencies should US payrolls come in strong today,” ING added.

traded 0.2% lower to 1.2285, with sterling on course to lose 1% this week after earlier falling to a 14-month low following a selloff in UK government bonds amid concern about British finances.

“We expect higher yields to act as an additional headwind to growth via household remortgaging and weaker investment,” said analysts at Goldman Sachs, in a note.

“The rise in gilt yields reinforces our view that UK growth will disappoint in 2025, with our 0.9% real GDP growth forecast notably below consensus (1.4%), the BoE (1.5%) and the OBR (2%).”

Yuan lacks support

In Asia, rose 0.3% to 7.3513, with the Chinese currency seeing continued weakness after soft inflation data for December, released earlier in the week. 

The prospect of trade tariffs under Trump also soured sentiment towards China. 

dropped 0.1% to 157.85, with the Japanese currency helped by the release of stronger-than-expected data earlier Friday.

This followed on from a bigger-than-expected increase in wage growth on Thursday, and has sparked increased speculation over a January interest rate hike by the Bank of Japan. 

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -The U.S. dollar rallied across the board on Friday after data showed the world’s largest economy created more jobs than expected last month, reinforcing expectations that the Federal Reserve will pause its rate-cutting cycle at its policy meeting later this month.

The dollar rose to its highest since July against the yen after the data and was last up 0.1% at 158.27 yen. The U.S. currency has risen in five of the last six weeks.

The euro, on the other hand, dropped to its lowest since November 2022 versus the greenback. The single euro zone currency was last down 0.6% at $1.024, falling for a second straight week.

A significant number of foreign exchange forecasters expect the euro to reach parity with the dollar in 2025, a Reuters poll showed this week.

A Labor Department report showed the U.S. economy added 256,000 jobs in December, much higher than economists’ forecasts for an increase of 160,000. The November jobs number was revised downward to 212,000.

The unemployment rate, meanwhile, dipped to 4.1%, compared with expectations of a 4.2% reading, while average hourly earnings increased 0.3% last month after gaining 0.4% in November. In the 12 months through December, wages advanced 3.9% after rising 4.0% in November.

“I think this will only encourage a continuation of the U.S. dollar upside that has been the market’s bias for a while, certainly serves to reinforce the U.S. exceptionalism theme, and should keep the Fed relatively hawkish compared to peers in the G10 space,” said Michael Brown, senior research strategist, at Pepperstone in London.

Following the nonfarm payrolls number, the U.S. rate futures market has fully priced in a pause in the Fed’s easing cycle at the January meeting, according to LSEG estimates. The market has also priced in just 31 basis points of easing in 2025 or just one rate cut, with the first rate move likely at the June meeting.

In other currencies, sterling tumbled to its weakest level since November 2023 against the dollar, and last changed hands at $1.2247, down 0.5%. It was sold off as well on Thursday in tandem with a selloff in gilt and concern about British government finances.

In Japan, prospects of sustained wage gains and the boost to import costs from a weak yen have heightened attention within the central bank to rising inflationary pressures that may lead to an upgrade in its price forecast this month, sources said.

The , meanwhile, advanced to its highest since November 2022, and was on track for a sixth consecutive weekly gain. That’s its longest run since an 11-week streak in 2023. The index was last up 0.2% at 109.48.

Currency              

bid

prices at

10

January​

02:44

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 109.39 109.2 0.17% 0.83% 109.97 109.

index 07

Euro/Doll 1.0271 1.0299 -0.27% -0.78% $1.0312 $1.0

ar 212

Dollar/Ye 157.74 158.105 -0.19% 0.29% 158.86 157.

n 645

Euro/Yen 162.06​ 162.85 -0.49% -0.71% 163.18 162.

05

Dollar/Sw 0.9149 0.9123 0.3% 0.83% 0.9189 0.91

iss 15

Sterling/ 1.2246 1.2307 -0.48% -2.08% $1.2323 $1.2

Dollar 194​

Dollar/Ca 1.4394 1.4392 0.02% 0.1% 1.4437 1.43

nadian 76

Aussie/Do 0.6167 0.6198 -0.46% -0.3% $0.6206 $0.6

llar 139

Euro/Swis 0.9396 0.9393 0.03% 0.03% 0.9419 0.93

s 86

Euro/Ster 0.8384 0.8365 0.23% 1.34% 0.8393 0.83

ling 66

NZ 0.5567 0.56 -0.58% -0.51% $0.5603 0.55

Dollar/Do 43

llar

Dollar/No 11.4159​ 11.3944 0.19% 0.44% 11.5117 11.3

rway 921

Euro/Norw 11.7266 11.7186 0.07% -0.36% 11.791 11.7

ay 174

Dollar/Sw 11.1842 11.1538 0.27% 1.52% 11.2547 11.1

eden 36

Euro/Swed 11.4879 11.4881 0% 0.18% 11.5053 11.4

en 75