DXY Rebounds after Jobs Report

The dollar Index held arounde 97.8 on Friday, trading sideways throughout the week as investors awaited upcoming inflation data that could shape Federal Reserve policy expectations. January’s PPI report is forecast to show wholesale inflation slowing to 0.3% month-on-month, down from 0.5% in December. Data on Thursday revealed that both initial and continuing jobless claims came in below forecasts, indicating a stable US labor market and ongoing employer retention of workers. The Fed is expected to keep rates on hold at least until June, as policymakers weigh elevated inflation against labor market risks. Investors also monitored uncertainties around US tariffs, following indications from the Trump administration that tariffs for some countries could rise from 10% to 15%, while the US and Iran agreed to continue nuclear negotiations next week. The dollar looks set to end the month higher, snapping a three-month losing streak.

The dollar index was little changed at 97.7 on Thursday, hovering not far from the one-month highs reached last week, as investors continued to await fresh catalysts after concerns over President Trump’s trade policies eased, though uncertainty still lingers. Sentiment was also weighed down by worries surrounding US-Iran talks. Meanwhile, both initial and continuing jobless claims came in below forecasts, signalling that the US labour market has stabilised and that employers are continuing to retain workers. At the same time, money markets have scaled back expectations for Federal Reserve rate cuts. The probability of a quarter-point reduction by June has fallen to 50%, the lowest level so far this year, while expectations of a third cut by year-end have all but faded.

The dollar index slipped to around 97.5 on Thursday, extending losses for a second consecutive session as uncertainty over US tariffs dampened confidence in the reserve currency. On Wednesday, US Trade Representative Jamieson Greer announced that the US tariff rate for certain countries could rise to 15% or higher from the recently implemented 10%, without providing further specifics. President Donald Trump offered relatively muted tariff commentary in his State of the Union address but signaled no intention to alter his approach, even after the Supreme Court struck down his broad reciprocal tariffs. On monetary policy, the Federal Reserve is widely expected to maintain interest rates at current levels next month. Meanwhile, US and Iranian negotiators are scheduled for the latest round of nuclear talks in Geneva later today, adding to the market’s cautious tone. Externally, the dollar eased against the yen amid speculation that the Bank of Japan may deliver a near-term rate hike.