Dollar Steady Ahead of Jobs Report

The dollar index held steady at 100 in thin trading on Friday as investors awaited the March jobs report, due later in the day, for fresh clues on the economy and the Federal Reserve’s policy outlook. A marked weakening in the labor market could revive expectations for Fed rate cuts later this year, which have been largely priced out as surging oil prices, driven by the Middle East war, reignited inflation concerns. On Thursday, President Donald Trump vowed more aggressive strikes on Iran over the next two to three weeks, dashing hopes for a quick end to the conflict and renewing demand for safe-haven assets. Meanwhile, a report indicated that Iran is working on a protocol with Oman to monitor traffic through the Strait of Hormuz, providing some relief. The dollar is on track for a modest weekly decline.

The dollar index moved back to 100 after reaching 100.2 early in the session, as traders assess the latest developments in the Middle East. A report that Iran is drafting a protocol with Oman to monitor traffic through the Strait of Hormuz offered some relief. However, volatility is expected to persist amid escalating rhetoric from President Trump and as crude prices remain near 2022 highs. Oil prices surged following Trump’s pledge to take more aggressive action against Iran. High energy prices are fuelling worries about an inflation spiral which could prompt the Fed to adopt a more hawkish stance. Earlier this week, Fed Chair Powell said officials may need to respond to the economic effects of the conflict, though not at this stage, adding that current policy is well positioned to allow a wait-and-see approach. Markets currently expect the Fed to keep the federal funds rate unchanged this year.

The dollar index was up to 100.5 on Thursday, approaching again ten-month highs reached last week, as concerns about a renewed inflation spiral resurfaced. Oil prices surged following US President Trump’s pledge to take more aggressive action against Iran, while offering no concrete plans to reopen the Strait of Hormuz. Crude prices remain near 2022 highs, fuelling worries about their inflationary impact, which could prompt the Fed to adopt a more hawkish stance and delay any rate cuts this year. Earlier this week, Fed Chair Powell said officials may need to respond to the economic effects of the conflict, though not at this stage, adding that current policy is well positioned to allow a wait-and-see approach. Markets currently expect the Fed to keep the federal funds rate unchanged this year. The greenback was mostly higher against the British pound, the Australian dollar and the euro.