FOREX-Dollar steady before U.S. jobs data, set for worst week since March

* Euro set for best weekly performance since late Sept. 2018
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Daniel Leussink
TOKYO, June 7 (Reuters) - The dollar was set for its worst
week since March as it trod water on Friday ahead U.S. jobs data
that is seen supporting chances of a U.S. interest rate cut,
while the euro held gains made after a less dovish than expected
central bank policy review.
The U.S. non-farm payrolls data for May due out later in the
global day is expected to show a drop in hiring.
A slowdown in the U.S. labour market was evident in a
worse-than-expected ADP National Employment Report released on
Wednesday, which showed private U.S. employers added 27,000 jobs
in May, the smallest monthly gain in more than nine
years. The dollar has been hit in recent weeks by the rising
expectations for a U.S. rate cut before year-end, as an
escalating China-U.S. trade row hurts business confidence and
growth. Recent comments from Fed officials have also pointed to
an easing in coming months.
Markets have priced in slightly more than a 50% probability
rates will be cut 25 basis points by the end of July and one
more cut would follow by the end of the year, according to the
CME Group's FedWatch Tool.
"We've seen some fundamental changes when it comes to the
Fed. In their hiking cycle, they've obviously been put on pause.
If anything, the market is at least expecting a cut this year,
if not two," said Bart Wakabayashi, Tokyo branch manager at
State Street Bank.
The European Central Bank (ECB) on Thursday ruled out
raising interest rates in the next year and even opened the door
to cutting them or buying more bonds as risk factors such as a
global trade war and Brexit drag the euro zone economy down.
Still the market been expecting a stronger hint of rate cut,
and consequently the euro and euro zone bond yields rose as a
result, putting more pressure on the dollar.
Against a basket of six peers, the dollar was steady at
97.042 .DXY , trading about 0.3% above an eight-week low of
96.749 brushed on Wednesday.
The index was on course for a 0.72% loss this week, its
worst weekly performance since the week of March 15, when it
gave up 0.73%.
"There's probably more reason to sell the dollar right now
as opposed to the strength it usually carries as a safe haven,"
Wakabayashi added.
The euro EUR= jumped half a percent during the previous
session as markets had positioned on a more dovish signal from
the ECB and an acknowledgement of weak economic growth in the
bloc. The single currency last edged down 0.05% to $1.1269, but
was still set for a weekly gain of 0.9%, its best weekly
performance against the dollar since late September last year,
when it rose nearly 1.1%.
"I think the ECB policy was quite dovish as the forward
guidance was prolonged, but the market was hoping the bank would
be even more dovish," said Daiwa's Ishizuki.
Elsewhere in the currency market, the dollar was 0.05%
higher at 108.47 yen JPY= .
Market participants were also keeping tabs on developments
around Washington's trade negotiations with both China and
Mexico.
U.S. President Donald Trump said on Thursday he would decide
whether to carry out his threat to hit China with tariffs on at
least $300 billion in the country's goods after a G20 meeting
late this month. (Editing by Simon Cameron-Moore)