U.S. Dollar Weakens Despite Strong Jobs Data as Markets Eye Inflation Figures
The U.S. dollar moved slightly lower on Thursday, staying under pressure and heading toward a weekly loss, even after stronger-than-expected U.S. employment data.
At 04:30 ET (09:30 GMT), the Dollar Index — which measures the greenback against a basket of six major currencies — slipped 0.1% to 96.700. The index remains on track to post a weekly decline of roughly 1%.
Limited Boost From Solid U.S. Payrolls
The dollar received only modest support from Wednesday’s upbeat labor market report. U.S. job growth accelerated in January, while the unemployment rate fell to 4.3%, signaling continued resilience in the American economy.
Following the release, traders scaled back expectations for near-term Federal Reserve rate cuts, reflecting stronger confidence in economic momentum.
However, analysts at ING noted that the dollar’s rebound was underwhelming. Although payrolls figures were solid, roughly half of the initial rally quickly faded. Importantly, short-term U.S. dollar rates rose and remained elevated, suggesting the pullback was not driven by doubts about the jobs data itself.
Instead, ING believes markets are still inclined to sell dollar rallies based on longer-term considerations. As a result, the threshold for a sustained dollar recovery has risen, meaning further positive economic data may be required to shift sentiment decisively.
Attention now turns to upcoming U.S. consumer price index (CPI) data due Friday, which could provide fresh insight into inflation trends and Federal Reserve policy direction. Weekly jobless claims data is also scheduled for release later in the session.
Pound Struggles as U.K. Growth Remains Weak
In Europe, GBP/USD climbed 0.2% to 1.3653. However, sterling struggled to build meaningful momentum after official figures showed the U.K. economy expanded only modestly in the final quarter of 2025.
According to the Office for National Statistics, gross domestic product increased by just 0.1% between October and December, matching the slow pace recorded in the previous quarter.
ING described the performance as underwhelming, highlighting particular weakness in construction activity and business investment. The bank added that continued softness in hiring and slower wage growth could prompt the Bank of England to cut rates in March, followed by another reduction in June.
Euro Gains as Dollar Selling Continues
EUR/USD advanced 0.1% to 1.1886, supported largely by broader dollar weakness rather than euro-specific strength.
ING analysts noted that the pair’s upward momentum is being driven primarily by strategic selling of the U.S. dollar. They expect EUR/USD to trade within the 1.1850–1.1900 range in the near term, while maintaining a slight downside bias.
Yen Strengthens on Intervention Speculation
In Asia, USD/JPY fell 0.2% to 152.93, touching its lowest level in three weeks. The Japanese yen strengthened following Prime Minister Sanae Takaichi’s recent election victory, with additional support stemming from speculation about possible government intervention in currency markets.
Japan’s top currency diplomat, Atsushi Mimura, declined to confirm whether authorities had intervened recently but reiterated that Tokyo is closely monitoring foreign exchange volatility. He also stated that Japan remains in close communication with U.S. officials regarding any coordinated action.
Yuan and Aussie Dollar Movements
Elsewhere, USD/CNY declined 0.2% to 6.9019, marking its lowest level since May 2023. The Chinese yuan remained firm after a series of strong midpoint fixes from the People’s Bank of China.
Meanwhile, AUD/USD slipped 0.1% to 0.7119 after recently reaching its highest level since early January. The Australian dollar had been supported by expectations of further rate hikes from the Reserve Bank of Australia following last week’s 25-basis-point increase.
RBA Governor Michele Bullock indicated that additional tightening remains possible if inflation becomes entrenched, though she noted that it is still unclear whether further hikes will be necessary.
