Dollar Strengthens Against Euro and Swiss Franc Ahead of Jobs Report

Market Reactions to Economic Data

By Chibuike Oguh

Dollar Performance Against Major Currencies

NEW YORK, Jan 8 (Reuters) - The dollar gained against the euro and Swiss franc on Thursday, as investors awaited Friday’s crucial nonfarm payrolls report, which could help assess the U.S. labor market and the probable path of interest rates.

Impact of U.S. Jobs Report on Currency Markets

Data on Thursday showed that the number of Americans filing new applications for unemployment benefits increased moderately last week amid relatively low layoffs. U.S. job openings fell more than expected in November while hiring eased, according to a Labor Department report on Wednesday.

Analysts' Predictions and Market Sentiment

"The market is looking for a bit more definitive evidence as to which way the economy is going," said Marvin Loh, senior global market strategist at State Street in Boston. "The consensus is that the dollar will continue to weaken from here given that there's still rate cuts expected from the Fed." 

Geopolitical Factors Influencing Currency Trends

The dollar was up 0.13% against the Japanese yen at 156.965.

The dollar index, which measures the U.S. currency against six rivals, was up 0.2% at 98.922 after hitting its highest since December 10.

Traders are pricing in at least two rate cuts from the Federal Reserve this year, although a divided central bank indicated in December there would be only one cut in 2026. The Fed is expected to keep rates steady at its meeting this month. Jerome Powell's term as Fed chair ends in May.

President Donald Trump's administration could be forced to refund more than $133.5 billion in tariffs to importers if the U.S. Supreme Court this week declares his duties unlawful, which could resurface to hurt the dollar.

Trump said on Wednesday the 2027 U.S. military budget should be $1.5 trillion, stoking some concerns about rising debt and a higher risk premium on U.S. assets.

"I think to a certain degree, we are going to be range bound for a little while until we get a little more clarity on whether or not the Fed is going to not only resume their cutting cycle but also cut more aggressively with the new leadership changes expected at the Fed a little later this year," Loh added.

EURO ZONE DATA AND GREENLAND IN FOCUS

On the euro front, recent inflation figures drove the currency lower and German Bund yields to a one-month low. 

The euro was down 0.21% at $1.16510 on Thursday, after dropping by 0.45% in the last two sessions.

U.S. Secretary of State Marco Rubio told reporters Trump retained the option to address his objective to take over Greenland by military means, while alarmed allies, including France and Germany, were working on a response. 

"Geopolitics still doesn't look like they matter at least in the short term for markets," said John Velis, head of Americas macro strategy at BNY Markets. "Volatility across asset classes has also been crushed. I don't know why but implied volatility indexes in bonds and equities are really low."

Analysts flagged that the debate about changes in European Central Bank policy shifted towards the possibility of a rate hike a year from now, while inflation is currently getting back to target with core edging lower.

The dollar was up 0.21% to 0.79935 against the Swiss franc.

Shares in Japanese chemical manufacturers fell on Thursday while those of their Chinese rivals jumped after China said it was launching an anti-dumping probe into imports of chemicals used in chipmaking.

The Australian dollar eased 0.37% to $0.66950, just below the 15-month high it touched earlier this week. The Chinese yuan rose 0.15% against the greenback to 6.929 per dollar.

(Reporting by Chibuike Oguh in New York; Editing by Toby Chopra and Diane Craft)