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Investing.com - The U.S. dollar edged higher Friday, but was on course for a weekly loss, undermined by signs of U.S. economic weakness and continued trade tensions.
At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, climbed 0.2% to 98.892, on track for a weekly loss of around 0.5%.
Nonfarm payrolls up next
Economic data this week have tended to point to a cooling U.S. labor market amid a great deal of uncertainty surrounding U.S. President Donald Trump‘s chaotic trade policies.
The number of Americans filing for first-time unemployment benefits increased last week to a seven-month high, while a report from management services company ADP found that U.S. private employers added fewer jobs than anticipated in May.
This brings the widely-watched monthly official jobs report, due later in the session, firmly into focus. This is forecast to show that the U.S. added 130,000 jobs last month, while the unemployment rate remained at 4.2%.
“With a market seemingly positioned for a soft number today, we think it will take a figure substantially under +100k and a rise in the unemployment rate to trigger another leg lower in the dollar,” said analysts at ING, in a note.
Most currencies had surged against the dollar late on Thursday, helped by news that Trump and Chinese President Xi Jinping spoke in a more than one-hour-long call.
ECB set to pause?
In Europe, EUR/USD traded 0.2% lower to 1.1425, slipping from the 18-month high seen in the previous session in the wake of the European Central Bank’s policy meeting.
The ECB cut interest rates by a quarter point on Thursday, as widely expected, but took a relatively hawkish stance over further cuts, with President Christine Lagarde suggesting that the easing cycle was nearing its conclusion.
“The market still prices a further 25bp ECB cut later this year, but this has now been pushed back to October from September,” ING added.
“EUR/USD came close to 1.1500 on those Lagarde remarks yesterday. We’re going to need quite a soft set of U.S. data today to break that 1.1500 barrier above which the April 1.1575 high comes into play.”
GBP/USD slipped 0.2% to 1.3545, having scaled a more than three-year peak in the previous session, and was set to rise about 0.6% for the week.
Yen slips over BOJ rate hike doubts
In Asia, USD/JPY traded 0.4% higher to 143.96, with the yen pressured by growing doubts over whether the Bank of Japan had sufficient headroom to raise interest rates further.
Weak household spending data on Friday, coupled with soft overall wage income data on Thursday, sparked concerns over just how much private spending will improve in the coming months. Weak spending stands to undermine Japanese growth and inflation, and could raise the BOJ’s threshold for more rate hikes.
USD/CNY traded 0.1% higher to 7.1849, as a call between Trump and Xi did little to lift sentiment over stalled trade talks between Washington and Beijing.
Trump did tout a positive discussion with Xi, helping soothe some concerns over trade talks having stalled in recent weeks.
But traders were still holding out for a more permanent trade truce between the U.S. and China, after the two agreed to temporarily lower their steep trade tariffs in mid-May.