Foreign exchange markets were largely subdued as data releases sent conflicting signals about the momentum of the world’s largest economy. U.S. job openings fell more than expected in November and hiring softened, reinforcing the view that the labour market remains in a prolonged “no hire, no fire” phase. At the same time, activity in the services sector unexpectedly improved in December, pointing to resilience as the year drew to a close.
Against that backdrop, attention has turned to the nonfarm payrolls report, which is expected to provide clearer guidance on whether economic strength is easing enough to justify interest rate cuts later this year.
In Europe, the euro was little changed at $1.1679 and was on track for a modest weekly decline, the first of the year, ahead of regional data on consumer, business and economic sentiment. Despite the near-term pause, the single currency has been one of the strongest performers, rising roughly 13.5% in 2025 as the dollar struggled. Some analysts see scope for the euro to test levels above $1.20 in 2026 if U.S. monetary policy turns more accommodative.
Sterling slipped 0.3% to $1.3456 but remained close to a near four-month high reached earlier in the week, supported by expectations that UK interest rates will remain relatively elevated compared with peers.
“The latest U.S. data releases paint a mixed picture of the economy,” said Lloyd Chan, senior currency analyst at MUFG, adding that the uneven signals could encourage the Federal Reserve to proceed cautiously on policy easing.
Market pricing currently reflects expectations for at least two U.S. rate cuts this year, although Federal Reserve projections released in December pointed to only one additional cut in 2026. Policymakers are widely expected to keep rates unchanged at their January meeting.
In Asia, the Japanese yen was steady at 156.69 per dollar as traders refrained from taking strong directional views ahead of further economic releases. The Australian dollar edged down to $0.6704, just below a 15-month high touched earlier in the week, while the New Zealand dollar slipped 0.13% to $0.5763.
The dollar index, which tracks the greenback against six major counterparts, was flat at 98.737 and set for a small weekly gain. The index is coming off its weakest annual performance since 2017, and while analysts anticipate further declines, expectations are for a more gradual move.
“We might not see as many Fed rate cuts as expected in 2026, mainly because the country’s robust growth does not justify aggressive cutting,” said Matthias Scheiber, senior portfolio manager at Allspring Global Investments, who noted that any shift toward a more growth-focused policy stance would require careful communication given persistent inflation risks.
Geopolitical developments, including U.S. intervention in Venezuela and rising tensions between China and Japan, have so far had limited impact on currency markets, which have remained largely orderly through the week.
Some analysts noted that legal developments in Washington could become a more immediate catalyst. Markets are watching for a possible U.S. Supreme Court ruling related to President Donald Trump’s tariff policies, which could be announced as early as Friday.
“If there is a decision that the tariffs are constitutional, this takes the demand for refunds off the table,” said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities. “This would be supportive for the dollar.”