The U.S. dollar traded steadily on Thursday as investors digested a mixed batch of economic data that offered conflicting signals about the strength of the American economy. Market attention remained firmly focused on Friday’s closely watched nonfarm payrolls report.
The euro held near $1.1679, positioning itself for a modest weekly decline as traders awaited upcoming indicators on consumer, business, and economic sentiment across the eurozone. Despite the near-term softness, the single currency surged roughly 13.5% in 2025, benefiting from the dollar’s weak performance. Some analysts believe the euro could push above the $1.20 level in 2026.
Sterling slipped 0.3% to $1.3456 but stayed close to the nearly four-month high reached earlier in the week, reflecting resilience despite mild profit-taking.
U.S. labor market data released on Thursday pointed to a “no hire, no fire” environment. Job openings fell more than expected in November, while hiring activity slowed. At the same time, services sector activity unexpectedly strengthened in December, suggesting the economy closed 2025 on solid footing. The focus now turns to Friday’s payrolls data for clearer direction.
Lloyd Chan, senior currency analyst at MUFG, said the latest data paints a mixed economic picture, reinforcing a cautious stance from the Federal Reserve.
Markets are currently pricing in at least two Federal Reserve rate cuts this year, even though policymakers signaled in December that only one additional cut may be delivered in 2026. The Fed is widely expected to keep interest rates unchanged at its January meeting.
The Japanese yen traded flat around 156.69 per dollar, as traders avoided making large directional bets ahead of key economic releases. Meanwhile, the Australian dollar eased to $0.6704, just below a 15-month high reached earlier in the week, while the New Zealand dollar slipped 0.13% to $0.5763.
The dollar index, which tracks the U.S. currency against six major peers, remained steady near 98.737 and was on course for a small weekly gain. Despite the stabilization, the dollar is coming off its weakest annual performance since 2017, with analysts forecasting another year of decline, though at a slower pace.
Matthias Scheiber, senior portfolio manager and head of the multi-asset team at Allspring Global Investments, said aggressive rate cuts may be unlikely in 2026 given the resilience of U.S. growth. He added that a shift toward a more pro-growth policy framework is possible, though the Fed will need to clearly communicate how it balances growth against persistent inflation pressures.
Global currency markets have largely shrugged off recent geopolitical developments, including U.S. intervention in Venezuela and rising tensions between China and Japan, with price action remaining relatively subdued.
Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities, noted that a potentially more significant catalyst for the dollar could come from an upcoming decision by the U.S. Supreme Court regarding tariff policies under President Donald Trump.
Speculation has grown that the ruling could be issued as early as Friday. If the court upholds the tariffs as constitutional, it could remove refund-related uncertainty and provide a supportive boost for the U.S. dollar.
