Jobs data weighs on dollar, BoJ policy shift boosts Yen

The dollar weakened after three consecutive days of gains, affected by recent ADP data and other indicators pointing to a slowing labor market.

Tomorrow’s Non-Farm Payroll (NFP) report could be critical for the dollar’s trajectory and could influence expectations of a rate cut by the Fed in March, a topic likely to be central in next week’s Federal Reserve meeting.

Lower-than-expected NFP figures could weigh further on the dollar, while the upcoming meeting is expected to provide a clearer view of monetary policy.

The euro, meanwhile, found support as the dollar fell, but continues to face headwinds from disappointing economic data and slowing inflation, hinting at potential ECB rate cuts early next year. This situation, alongside dovish ECB rhetoric, casts a negative outlook for the Euro.

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The yen emerged as the strongest performer today, buoyed by the Bank of Japan’s hints of an imminent monetary policy shift. This anticipation has also triggered significant movements in Japanese bond yields, suggesting the potential for a strong reversal for the Yen if market expectations are met.

The yuan experienced volatile movements in response to mixed trade data and continuous Moody’s downgrades of China’s economic credit rating. Chinese authorities actively support the Yuan to prevent further decline amid a deteriorating economic landscape, making this support critical for the currency’s stability.