The US Dollar Index (DXY), which tracks the US Dollar against a basket of six major currencies, is trading sideways above the 98.50 level during Thursday’s Asian session, consolidating after two consecutive days of gains. The Greenback remains range-bound as investors adopt a cautious stance ahead of key US labor market data, with recent indicators pointing to a fragile economic backdrop.
Market sentiment remains restrained as traders avoid aggressive positioning before Friday’s highly anticipated US Nonfarm Payrolls report, a key driver for near-term expectations around Federal Reserve policy.
Focus shifts to US labor market data
In the near term, attention will turn to the Weekly US Initial Jobless Claims figures due later in the North American session. However, the primary focus remains Friday’s NFP release, which is expected to show job gains of around 55,000 in December, down from 64,000 in November.
A weaker-than-expected reading could reinforce bets on Fed rate cuts later this year, while stronger labor market data may lend fresh support to the US Dollar.
Mixed US data sends conflicting signals
Recent US economic releases have delivered a mixed picture. On Wednesday, the Institute for Supply Management reported that the Services PMI rose to 54.4 in December from 52.6 previously, beating market expectations and signaling resilience in the services sector.
In contrast, labor market indicators were less supportive. JOLTS data showed job openings declined to 7.146 million in November, down from a revised 7.449 million in October and below market forecasts, suggesting easing demand for labor.
Meanwhile, ADP data revealed that private-sector employment increased by 41,000 jobs in December, following a revised decline of 29,000 in November and falling short of expectations, reinforcing concerns over slowing job growth.
Dovish Fed rhetoric caps dollar upside
Comments from Federal Reserve officials continue to weigh on the Greenback. Fed Governor Stephen Miran stated earlier this week that aggressive interest rate cuts may be necessary this year to sustain economic momentum. Adding to the dovish tone, Minneapolis Fed President Neel Kashkari warned that the unemployment rate could rise more sharply than anticipated.
This combination of cautious data signals and dovish Fed commentary has kept the US Dollar Index anchored near current levels, with traders awaiting clearer direction from Friday’s employment report.
Ready to start trading Forex? Join iXBroker today and kick-start your trading journey now!
