The US dollar rebounded slightly on Thursday after bouncing off recent lows. The rally came ahead of key economic data, including the highly anticipated US jobs report. Meanwhile, the pound was slightly lower after rising in the previous session, weighed down by concerns over the Bank of England’s upcoming meeting.
At 2:30 p.m. Riyadh time, the US dollar index was up 0.38% at 107.850 against a basket of currencies. The rally came amid market anticipation of the upcoming jobs data. The euro fell 0.37% to 1.0364, while the US dollar rose 0.29% against the Canadian dollar to 1.4353. The dollar also gained 0.25% against the Chinese yuan and 0.2% against the Mexican peso.
The US dollar rebounded slightly
The dollar rebounded to fresh highs in early trading on Thursday, although it is still far from a three-week high of 109.88 hit earlier in the week. The rally came as expectations indicated that US President Donald Trump was preparing to impose 25% tariffs on imports from Mexico and Canada. However, the two countries secured one-month exemptions at the last minute, which reversed the dollar’s upward trend.
In this context, analysts pointed out in a note issued by ING that the correction in the dollar’s value was due to several factors, with a reference to the news related to the tariffs. The analysts said that these moves may be driven by commercial purposes rather than ideology.
Job Report Expectations and Its Impact on the US Dollar
All eyes remain on the US jobs report due next Friday. The report is likely to show that employers added 154,000 jobs in January, a significant decrease from 256,000 jobs in the previous month. The unemployment rate is likely to remain steady at 4.1%, reflecting stability in the US labor market.
The US dollar rises after Trump’s comments and easing market tensions
There is a lot of anticipation as to whether this jobs data will lead to an additional correction in the value of the dollar by 1-2%. Earlier this week, the US job openings data “JOLTS” showed weak numbers, which could weigh on the dollar. Analysts predict that the correction will not last long and that the dollar will strengthen further in the second quarter as the tariffs increase structural effects.
The US dollar witnessed a noticeable improvement on Thursday, as it rebounded from the lows recorded in the past days. This recovery came after the statements of the US President, Donald Trump, which eased the anxiety in the financial markets. These statements contributed to the rise of the US Dollar Index (DXY), which tracks the performance of the dollar against a basket of major currencies.
In the European trading session, the US Dollar Index rose to around the 108.00 level, which is a slight recovery compared to its previous levels. This coincided with Trump’s statements, which touched on several important political files, including his aspiration to reach a nuclear agreement with Iran, as well as his intention to seize Gaza. Trump also indicated that his administration may present a plan to end the war in Ukraine soon. These statements helped ease some concerns about geopolitical risks that were negatively affecting global markets.
US economic data supports the dollar
On another note, comments by US Treasury Secretary Scott Bessant indicated a potential support for US bond yields. Bessant explained that the US administration is looking to lower the yields on US 10-year bonds instead of lowering short-term interest rates set by the Federal Reserve. These statements reinforced optimism about the US dollar, as US bond yields rose after a period of decline.
Bank of England decisions and their impact on the British pound
Meanwhile, the Bank of England cut interest rates by 25 basis points, bringing the rate to 4.50% from 4.75%. The move came as widely expected, with 7 MPC members supporting the cut and 2 voting for a larger 50 basis point cut. The Bank of England’s decision came amid concerns over slowing economic growth in the UK, which weighed on the British pound, which fell 0.5% to $1.2447.
Markets are also awaiting other economic data from the US, such as jobless claims and retail sales in the eurozone. Expectations are for a slight increase in the number of initial jobless claims in the US, which could reflect a rise in unemployment amid growing economic pressures.
Technically, the US dollar index is showing a slight improvement after several days of decline. The dollar index briefly crossed the 109.30 level, but was unable to hold it. If the dollar manages to regain this level, it will face resistance at 110.79, the highest level recorded in September 2022. If the upward trend continues, the dollar should head towards this area.
Stock Markets React to Trump’s Statements
After the soothing statements made by the US President, investors began to return to the markets, as stock markets in China, Europe and US futures witnessed a noticeable recovery. Improved sentiment in financial markets, following the reduction of concerns related to geopolitical tensions, drove this improvement.
Expectations are increasing that the US Federal Reserve will keep interest rates unchanged at its next meeting on March 19. The CME FedWatch tool indicates that the probability of keeping interest rates unchanged exceeds 85%. In light of this trend, the dollar is expected to continue to improve if US economic data continues to support this trend.
