Dollar muted ahead of monthly jobs report

The dollar index held steady around 107.7 on Friday as traders awaited the highly anticipated monthly jobs report, which could influence the outlook for Federal Reserve monetary policy.

Dollar muted ahead of monthly jobs report With the Federal Reserve closely monitoring labor market data, markets are forecasting nonfarm payroll growth of 170,000 for January, a slowdown from the 256,000 jobs added in December. The unemployment rate is expected to remain steady at 4.1%, signaling stability in the labor market despite concerns over a potential economic slowdown. Investors are keen to see how these figures will impact the Fed's stance on interest rates, particularly as the central bank remains focused on managing inflation while balancing growth.

Treasury Secretary supports strong dollar

In other news, Treasury Secretary Scott Bessent expressed support for a strong dollar and confirmed that there are no plans to change the government’s debt-issuance strategy, signaling confidence in the dollar’s position. He also sought to clarify comments made by President Trump at last month’s Davos summit, stating that the president is not pressuring the Federal Reserve to cut rates. This statement comes amid growing speculation about the Fed's next moves, as markets currently price in two 25 basis point rate cuts later this year. Bessent’s remarks appeared to reassure investors that the administration is not seeking to influence the central bank's independent monetary policy decisions.

Week may end lower

Meanwhile, the dollar is set to finish the week lower following a dramatic reversal driven by easing concerns over a global trade war. After months of escalating tensions, recent signs of de-escalation between the US and China have sparked optimism in financial markets, reducing the demand for the safe-haven greenback. As tensions ease, investors have become more focused on the economic data and the Fed’s potential policy adjustments, with the dollar’s direction now closely tied to the upcoming jobs report and further trade negotiations. The balance between economic fundamentals and geopolitical risks will likely continue to play a key role in shaping the dollar’s trajectory in the weeks ahead.