DXY Falls after Payrolls, Still Set for Weekly Gain

The dollar index fell to 99.1 on Friday after a worse-than-expected jobs report increased pressure on the Fed to consider resuming rate cuts. US payrolls unexpectedly fell by 92,000 in February, marking the biggest monthly decline since October. For the week, the dollar is still up around 1.5%, supported by safe-haven demand as the escalating Middle East conflict and rising oil prices unsettled financial markets. The US-Israeli offensive against Iran has now entered its seventh day, while Tehran launched a fresh wave of missile and drone strikes across the Gulf. Former President Donald Trump also stated he wants a role in selecting Iran’s next leader, dismissing Mojtaba Khamenei, son of the late supreme leader, as an unlikely choice. Higher oil prices have fueled fears of resurgent global inflation. The dollar gained most against the euro this week, reflecting Europe’s heavy reliance on Middle Eastern oil.

The dollar index steadied around 99 on Friday and was poised to gain more than 1% this week, supported by safe-haven demand as the escalating Middle East conflict and rising oil prices unsettled financial markets. The US-Israeli offensive against Iran has now entered its seventh day, while Tehran launched a fresh wave of missile and drone strikes across the Gulf. President Donald Trump also stated he wants a role in selecting Iran’s next leader, dismissing Mojtab Khamenei, son of the late supreme leader, as an unlikely choice. Higher oil prices fueled fears of resurgent global inflation, bolstering bets that the Federal Reserve will delay rate cuts and pressuring currencies of major oil-importing economies. Markets have pushed back expectations for the next Fed rate cut to September or October from earlier projections of July. The dollar gained most against the euro this week, reflecting Europe’s heavy reliance on Middle East oil.

The dollar index rose to 99.1 on Thursday, its highest level since mid-January, as the escalating conflict with Iran revived safe-haven demand. Early relief faded as the was is in its sixth day. Both Iran and the US signaled that attacks could intensify in the coming days, pushing oil and natural gas prices higher, reigniting inflation concerns and prompting traders to scale back expectations for Fed's rate cuts to just one this year, down from two earlier in the week. Meanwhile, recent economic data reinforced the strength of the US economy. Initial claims came in below forecasts, productivity rose more than expected last quarter, job cuts declined sharply, and the ISM Services PMI showed the sector unexpectedly expanding at the fastest pace since mid-2022. Investors are also viewing the US as a relative safe haven given its greater energy independence, further supporting the currency. The greenback posted the strongest gains against the Australian dollar, the yen, and the euro.