NEW YORK — The dollar rose for a third consecutive session on Friday, driven by the latest US employment figures that surprised to the upside and reinforced expectations that the Federal Reserve will keep policy rates on hold for the foreseeable future. Market participants noted that the data reinforced the dollar’s safe‑haven appeal, pushing the currency to its highest level in recent weeks against a basket of major peers.
Meanwhile, the euro softened as the just‑released eurozone purchasing managers’ index dropped into contraction territory, signalling a slowdown in manufacturing activity. Strategists pointed to the divergence between the robust US labor market and the weakening euro‑area outlook as a key driver behind the currency move. The European Central Bank, which has signalled a data‑dependent approach, is likely to maintain its cautious stance, further capping euro support.
Technical charts show the dollar index carving out a series of higher highs, with moving averages aligned in a bullish configuration. Momentum indicators have moved into overbought territory, suggesting a short‑term pull‑back could be on the horizon, but the broader trend remains upward as long‑term support holds. Traders are monitoring the 50‑day moving average as a near‑term reference point for potential reversals.
Market participants are now focusing on the upcoming slate of central bank speakers, including Fed officials and ECB council members, for further clues on the policy trajectory. Safe‑haven flows have also lifted gold to multi‑month highs, while bitcoin continues to benefit from institutional demand. Crude oil, however, has retreated from recent peaks amid concerns over global demand, weighing on commodity‑linked currencies such as the Canadian and Australian dollars.
Outlook: If US economic indicators—particularly inflation and retail sales—remain resilient, the dollar is likely to retain its advantage. A surprise softening in US data could quickly shift sentiment and spark a correction. Traders should watch for any sign of a shift in Fed guidance, as well as developments in euro‑area data that could alter the ECB’s stance.
Disclaimer: This analysis is AI-generated for educational purposes. Traders should verify all information and conduct their own research before making trading decisions.