Dollar Steady as Investors Weigh U.S. Data, Fed Outlook, and Global Risks

The U.S. dollar traded in a narrow range on Thursday as investors cautiously assessed a wave of economic data ahead of the highly anticipated U.S. nonfarm payrolls report due Friday. Market sentiment remained restrained amid mixed signals from the U.S. economy and ongoing geopolitical tensions, keeping major currencies largely stable.

In early Asian trading, the euro held steady near $1.1678, heading for a modest weekly decline, while the British pound hovered around $1.3460. The Japanese yen was little changed at roughly 156.78 per dollar, reflecting traders’ reluctance to take large positions before key economic and political developments. Meanwhile, the Australian dollar traded near $0.6721, just below a 15-month high reached earlier in the week, and the New Zealand dollar was stable around $0.5769.

Recent U.S. labor market data showed job openings falling more than expected in November, while hiring activity softened, reinforcing the view that the market is stuck in a “no hire, no fire” phase. At the same time, U.S. services sector activity unexpectedly improved in December, suggesting the economy ended 2025 on relatively solid ground. This combination of slowing labor demand and resilient services growth has complicated the outlook for monetary policy.

According to market pricing, investors expect at least two Federal Reserve rate cuts this year, although Fed officials signaled in December that only one additional cut may be needed in 2026. Most analysts expect the central bank to keep interest rates unchanged at its January meeting. The dollar index, which tracks the greenback against six major currencies, hovered near 98.7 and was on track for a slight weekly gain, despite the dollar posting its weakest annual performance since 2017.

Geopolitical developments, including U.S. involvement in Venezuela and rising China-Japan tensions, have so far had limited impact on currency markets. However, attention is also focused on a potential U.S. Supreme Court ruling regarding former President Donald Trump’s tariff policies, which analysts say could significantly influence the dollar if released as early as Friday.