Forex Market Analysis: Dollar Strengthens on US Jobs Data

The US dollar demonstrated moderate gains versus the euro and pound in Thursday trading, while exhibiting mixed performance against the Japanese yen. Labor market data released today showed that initial jobless claims rose to 217,000—below the 227,000 forecast and previous 221,000 reading. The four-week moving average fell from 229,500 to 224,500, and the total number of continuing unemployment benefit recipients declined to 1.393 million, missing expectations for a slight increase to 1.397 million.

The US labor market remains resilient despite a fresh uptick in inflation, giving the Federal Reserve more justification to hold borrowing costs steady. Notably, President Donald Trump is scheduled to make an official visit to the central bank today—the first such visit by a sitting US president in nearly two decades. Market participants expect Trump to renew his call for Fed Chair Jerome Powell and the board to adopt a more accommodative monetary policy. In parallel, investors are watching for progress in US-EU trade talks. According to Bloomberg, the sides are attempting to finalize a blanket 15% tariff on all European imports. Washington may drop tariffs on aerospace, timber, select pharmaceuticals, and agricultural goods, but remains unwilling to lift the 50% steel duty.

Eurozone

The euro came under pressure against the US dollar but strengthened against the pound and was mixed versus the yen. The main focus was today’s European Central Bank (ECB) meeting, which saw all key rates left unchanged (main: 2.15%, deposit: 2.00%, marginal: 2.40%). Policymakers cited significant economic uncertainty driven by ongoing trade disputes. In its statement, the ECB noted that "domestic price pressures continue to ease, and wage indexation has slowed." President Christine Lagarde told reporters the bank will remain data-dependent and intervene as needed. Analysts expect at least one more rate cut by year-end. Separately, July flash PMIs surprised to the upside: manufacturing rose from 49.5 to 49.8 (consensus: 49.7), while services jumped from 50.5 to 51.2 (forecast: 50.6), and the composite index reached 51.0 versus 50.8 expected.

United Kingdom

Sterling fell against all major rivals—euro, yen, and US dollar—after disappointing preliminary July PMIs. The manufacturing index ticked up from 47.7 to 48.2 but remained in contraction, while services retreated from 52.8 to 51.2. The composite index dropped from 52.0 to 51.0, pointing to a slower recovery, driven mostly by non-manufacturing firms. Meanwhile, the Confederation of British Industry (CBI) industrial order index improved slightly from –33 to –30. Analysts highlight persistent uncertainty about future demand, ongoing margin pressure, and a lack of skilled labor. Businesses expect further increases in goods and services prices. According to a Reuters survey, most economists believe the UK economy will continue to grow slowly but steadily, giving the Bank of England scope to cut rates in August and November—even as inflation remains above target in the coming months.

Japan

The yen strengthened against the pound and was mixed against both the euro and the US dollar. Preliminary July PMIs revealed that manufacturing declined from 50.1 to 48.8 (contraction zone), while services climbed from 51.7 to 53.5. The composite index registered 51.5, ahead of the 50.9 forecast. Business activity in Japan is expanding, but the industrial sector remains under pressure from elevated US tariffs. Most experts expect the Bank of Japan to hike rates at least once more by year-end, although further deterioration in manufacturing could delay those plans.

Australia

The Australian dollar advanced against the yen, pound, and US dollar, while trading mixed against the euro. Preliminary July PMIs beat expectations: manufacturing rose from 50.6 to 51.6, services slipped from 53.8 to 51.8, and the composite jumped from 51.6 to 53.6, well above the expected 51.0. These figures may encourage the Reserve Bank of Australia (RBA) to keep rates steady. In a speech today, RBA Governor Michele Bullock emphasized the need for a balanced approach to monetary easing. Unemployment in June aligned with RBA forecasts, and leading indicators do not suggest any near-term uptick in joblessness.

Oil

Crude oil prices attempted a rebound amid optimism for a near-term US-EU trade deal, positive inventory reports from the American Petroleum Institute (API) and US Energy Information Administration (EIA), and renewed sanctions threats on Russian oil exports. API reported a drawdown of 0.577M barrels, while EIA showed a much steeper drop of 3.169M barrels, easily beating forecasts for a –1.4M barrel change. Gasoline stocks also fell by 1.738M barrels, indicating robust demand in the world’s largest economy. The US Department of Energy is now considering further sanctions against Russian oil supplies, which officials believe could help resolve the conflict in Ukraine more quickly.