The US dollar remained on track to rise for a third consecutive session on Thursday, although mixed US economic data kept markets cautious ahead of the highly anticipated US nonfarm payrolls report due on Friday.

Data released on Thursday showed the US labor market appears stuck in a “no-hire, no-fire” phase, as job openings fell by more than expected in November while hiring slowed. At the same time, US services sector activity improved unexpectedly in December, suggesting the economy ended 2025 on relatively solid footing.

The dollar index, which measures the US currency against a basket of six major peers, rose 0.08% to 98.807, heading for a third straight daily gain. This comes after the dollar posted its worst annual performance since 2017, with analysts expecting continued downside pressure on the currency this year.

Jack Janasiewicz, chief portfolio strategist at Natixis, said the US economy still appears to be in relatively good shape, noting that a large portion of short dollar positions has already been built, which could limit further downside in the near term. He added that emerging market currencies may be among the relative beneficiaries compared with the euro or the Japanese yen.

Markets are currently pricing in at least two interest rate cuts by the Federal Reserve this year, even though the US central bank indicated in December that it may deliver only one cut in 2026. The Federal Reserve is widely expected to keep interest rates unchanged at its meeting later this month.

Geopolitical concerns following the US intervention in Venezuela were largely ignored by markets, with investors focusing primarily on economic data. However, potential risks remain that could weigh on the dollar if the US Supreme Court rules that some of the emergency tariffs imposed by President Donald Trump’s administration are unlawful, a development that could negatively affect the US currency.

Weak data weigh on the euro

In European markets, the euro came under pressure after inflation data pushed German bond yields to their lowest level in a month. The euro slipped 0.05% to $1.1670, after falling around 0.45% over the previous two sessions.

Analysts noted that market discussion has begun to cautiously shift toward the possibility of an interest rate hike by the European Central Bank in about a year. However, the return of headline inflation to target levels and easing core inflation make it difficult to justify the start of a tightening cycle in the near term.

Asian currency moves

The Japanese yen rose 0.05% to 156.70 per dollar, as traders refrained from taking large positions ahead of key upcoming economic data. Analysts said any strong yen gains would depend on an easing of tensions with China, warning that further escalation, such as a full ban on rare earth exports, could deal a heavy blow to the Japanese currency.

Meanwhile, the Australian dollar slipped to $0.6704, edging lower from a 15-month high reached earlier in the week, while the New Zealand dollar fell 0.13% to $0.5763.

Gold prices retreated in the European market on Thursday, extending losses for a second consecutive session and nearing a loss of trading above $4,400 per ounce, as continued strength in the US dollar weighed on prices in the foreign exchange market.

Markets are awaiting the US monthly jobs report due on Friday, which is expected to provide strong signals on the Federal Reserve’s monetary policy path and the outlook for US interest rates throughout this year.

Price Overview

• Gold prices today: Gold declined by 0.9% to $4,415.79, from the session opening level at $4,456.33, after recording a high of $4,466.48.

• At Wednesday’s settlement, the precious metal lost around 0.9%, marking its first loss in four sessions, after earlier touching a one-week high at $4,500.45 per ounce.

US Dollar

The US dollar index rose by 0.15% on Thursday, maintaining gains for the third consecutive session and nearing a four-week high, reflecting continued strength of the US currency against a basket of major and minor currencies.

Data released on Wednesday showed an unexpected rebound in US services sector activity in December, indicating that the US economy ended 2025 on solid footing, which may give the Federal Reserve more time to assess its next step toward further interest rate cuts.

These data reduced expectations that the Federal Reserve will cut interest rates when it meets later this month.

US Interest Rates

• Federal Reserve Governor Steven Miran, whose term ends later this month, said on Tuesday that a sharp cut in US interest rates is needed to sustain economic growth.

• Minneapolis Federal Reserve President Neel Kashkari, a voting member of the rate-setting committee this year, said he sees a risk of a sharp rise in the unemployment rate.

• According to CME’s FedWatch tool, market pricing shows an 88% probability of leaving US interest rates unchanged at the January 2026 meeting, with a 12% probability of a 25-basis-point rate cut.

• Investors are currently pricing in two US interest rate cuts over the coming year, while Federal Reserve projections point to a single 25-basis-point cut.

• To reassess these expectations, investors are closely watching Friday’s US jobs report for December, which the Federal Reserve heavily relies on when determining the monetary policy path.

Gold Outlook

Bernard Sin, regional manager at MKS PAMP, said traders are balancing rising geopolitical tensions — including US intervention in Venezuela and the possibility of Greenland becoming a new flashpoint under what is known as the Trump doctrine — against incoming US macroeconomic signals.

He added that weaker labor market data has strengthened expectations for further Federal Reserve rate cuts, which supports non-yielding precious metals such as gold, but sentiment remains balanced as investors remain mindful of elevated volatility and the risk of profit-taking at high price levels.

SPDR

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged yesterday, with total holdings steady at 1,067.13 metric tons.

The euro edged lower in the European market on Thursday against a basket of global currencies, extending its losses for the third consecutive session against the US dollar, as focus remains on buying the US currency as one of the most attractive investment opportunities.

Official data showed a slowdown in inflation across Europe in December, highlighting easing inflationary pressures on European Central Bank policymakers, which has revived expectations for at least one European interest rate cut this year.

Price Overview

• Euro exchange rate today: The euro declined against the dollar by around 0.1% to 1.1671, from the opening level of 1.1677, recording a high at 1.1682.

• The euro ended Wednesday’s session down about 0.15% against the dollar, marking its second consecutive daily loss, following the release of Europe’s main inflation data.

US Dollar

The US dollar index rose by 0.1% on Thursday, maintaining its gains for the third straight session and approaching a four-week high, reflecting continued strength of the US currency against a basket of global currencies.

US services sector activity rebounded unexpectedly in December, signaling that the US economy ended 2025 on solid footing, which may give the Federal Reserve more time to assess its next move toward further interest rate cuts.

European Inflation

Official data released yesterday showed an unexpected slowdown in core inflation levels in Europe, underscoring easing inflationary pressures on European Central Bank policymakers.

Headline consumer price inflation rose by 2.0% year-on-year in December, in line with market expectations of a 2.0% increase, compared with a 2.1% rise in November.

Core consumer price inflation increased by 2.3% year-on-year in December, below market expectations of a 2.4% rise, compared with a 2.4% increase in November.

European Interest Rates

• Following the data, money market pricing for a 25-basis-point European Central Bank interest rate cut in February rose from 10% to 25%.

• Traders adjusted their expectations from keeping European interest rates unchanged throughout this year to anticipating at least one 25-basis-point rate cut.

The Japanese yen declined in the Asian market on Thursday against a basket of major and minor currencies, extending its losses for the third consecutive session against the US dollar, following the release of shock data from the world’s fourth-largest economy that showed a sharp decline in real wages in November.

These data contributed to easing inflationary pressures on Japanese central bank policymakers, giving the Bank of Japan more time to remain cautious and reassess the future path of interest rates before taking any additional steps toward monetary tightening.

Price Overview

• Japanese yen exchange rate today: The dollar rose against the yen by 0.15% to 156.95 yen, from the opening level of 156.74 yen, recording a low at 156.65 yen.

• The yen ended Wednesday’s session down 0.1% against the dollar, marking its second consecutive daily loss, following the release of strong data on US services sector activity.

US Dollar

The US dollar index rose by 0.1% on Thursday, extending its gains for the third straight session and approaching a four-week high, reflecting continued strength of the US currency against a basket of global currencies.

US services sector activity rebounded unexpectedly in December, signaling that the US economy ended 2025 on a solid footing, which may give the Federal Reserve more time to assess its next move toward further interest rate cuts.

Japanese Wages

Japan’s Ministry of Health, Labour and Welfare said on Thursday that total monthly cash earnings and a separate measure of full-time wages rose by 0.5% year-on-year in November, the slowest pace since December 2021, and well below market expectations of a 2.3% increase. Wages had risen by 2.5% in October, revised down from an initial 2.6%.

The sharp decline in Japanese wage growth paves the way for further easing in price pressures and a slowdown in inflation momentum in the coming period. A sustained easing of inflationary pressures on Bank of Japan policymakers significantly reduces the likelihood of additional interest rate hikes in Japan this year.

Japanese Interest Rates

• Following the data, market pricing for a 25-basis-point interest rate hike by the Bank of Japan at its January meeting fell from 20% to 5%.

• To reprice these expectations, investors are awaiting further data on inflation and unemployment levels in Japan, in addition to monitoring comments from Bank of Japan officials.