The U.S. dollar dipped slightly on Thursday, remaining under pressure and on course for a weekly decline even after a stronger-than-expected U.S. employment report. At 04:30 ET (09:30 GMT), the Dollar Index, which measures the greenback against six major currencies, traded 0.1% lower at 96.700 and faced a weekly loss of roughly 1%.
Limited dollar support
U.S. labor market data released on Wednesday showed job growth accelerating unexpectedly in January and a drop in the unemployment rate to 4.3%. While those figures signalled continued resilience in the U.S. economy and led traders to trim their expectations for Federal Reserve rate cuts, the dollar's upside from the news was muted.
Analysts at ING noted the mixed implications of the payrolls release. "There is good and bad news for the dollar after yesterday’s payrolls. The good one is intuitive: job numbers were good," they said. "The bad news for the dollar is that it should have rebounded more on the jobs data. Half of the initial USD rally reverted quickly, and that was not due to second thoughts on jobs figures: short-term dollar rates rose and stayed up. We instead read that as a sign markets remain minded to sell USD rallies on the back of longer-term considerations. This means the bar for a USD recovery is higher: more good data is needed, for a start."
Market participants are now focusing on U.S. consumer price index inflation data due on Friday for further guidance on the economic outlook and policy expectations. Weekly jobless claims are also scheduled for release later in the session and could offer additional near-term clues.
Sterling struggles after weak U.K. growth
In Europe, GBP/USD traded 0.2% higher at 1.3653, but sterling's gains were limited following data showing the U.K. economy posted only modest growth at the end of 2025. The Office for National Statistics reported that gross domestic product expanded by 0.1% in the October-to-December period, matching the pace recorded in the third quarter.
ING commented on the U.K. data: "The U.K. economy ended 2025 on a lackluster note. Though not a huge surprise, the weakness in construction and business investment is particularly eye-catching. So long as the recent weakness in hiring, coupled with the sharp slowdown in wage growth, continues, we expect a March cut from the BoE, followed by another move in June."
Euro supported mainly by dollar weakness
EUR/USD climbed 0.1% to 1.1886, helped by the broader dollar selloff. ING observed that support for the euro was driven largely by strategic dollar selling rather than strength originating from the euro area itself. "The support for EUR/USD continues to come almost entirely from strategic USD selling, with little to no contribution from the euro side," their analysis said. "EUR/USD may hover around 1.1850-1.1900 for today. We retain a slight preference for the downside, but a flat profile for the near term appears the most likely scenario."
Yen firm on intervention talk
In Asia, USD/JPY fell 0.2% to 152.93, reaching its lowest level in three weeks as the yen strengthened after Japanese Prime Minister Sanae Takaichi's decisive election victory over the weekend. The currency's move drew attention to speculation that Tokyo might intervene to influence the exchange rate.
Top currency diplomat Atsushi Mimura declined to comment on whether Tokyo had intervened in the yen in recent weeks, while reiterating that the government would closely watch the currency for any outsized volatility. He also said that Tokyo was in close contact with U.S. authorities over any joint intervention.
Other Asian moves
USD/CNY edged down 0.2% to 6.9019, slipping to its lowest level since May 2023 as the yuan benefited from a series of firm midpoint fixes by the People’s Bank of China.
AUD/USD fell 0.1% to 0.7119 after earlier in the week reaching its strongest level since early January. The Australian dollar had been supported by rising market bets that the Reserve Bank of Australia would raise interest rates again after a 25 basis point increase last week.
RBA Governor Michele Bullock told lawmakers on Thursday that the bank would raise rates again if inflation became "entrenched," while noting it was not yet clear whether additional hikes would be required to bring inflation down.
Across currency markets, the dollar's moves were relatively contained despite stronger labor market data, with traders looking to upcoming inflation readings and central bank signals for clearer direction. Other major currencies found support or resistance coming from domestic data releases and policy commentary, with intervention talk adding a distinct element to recent yen strength.