Investing.com - The U.S. dollar slipped lower Friday, handing back some of the previous session’s gains ahead of the release of the much-watched monthly jobs report.
At 05:15 ET (09:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, dropped 0.4% to 99.682, having seen some buying on Thursday in thin volumes with many countries on holiday.
Dollar slips ahead of payrolls
The greenback has gathered some momentum recently, helped by optimism that China and the U.S. will soon hold trade talks aimed at softening the blow of U.S. President Donald Trump’s tariffs.
However, traders are acting with a degree of caution Friday ahead of the release of the key U.S. nonfarm payrolls data for April, due later in the day.
The print is expected to be the most recent reflection of heightened economic uncertainty in the U.S., and is expected to show a decline in payrolls last month.
Gross domestic product data released earlier this week showed the U.S. economy unexpectedly contracted in the first quarter.
“The question today is whether US jobs data can trigger a reversal in the dollar momentum,” said analysts at ING, in a note. “We think not, that’s because an activity and jobs market decline is already embedded in the value of the USD, so a relapse of intense dollar shorting probably requires evidence of an abrupt rise in joblessness, not simply a gradual employment slowdown.”
Euro helped by manufacturing PMIs
In Europe, EUR/USD traded 0.4% higher to 1.1333, with the single currency boosted by signs of stabilization in the eurozone’s troubled manufacturing sector.
Eurozone manufacturing output grew at the fastest pace in just over three years in April despite overall factory activity remaining in contraction territory, a survey showed on Friday.
HCOB’s eurozone final headline manufacturing Purchasing Managers’ Index (PMI) rose to 49.0 in April from 48.6 in March, marking its highest level in 32 months but remaining below the 50 mark separating growth from contraction.
The April flash CPI release for the eurozone showed that inflation remained unchanged at 2.2% on an annual basis from March.
GBP/USD edged 0.1% higher to 1.3293, with sterling having risen almost 4% in April, its strongest monthly performance since November 2023.
The pound may also be benefiting from expectations of an improvement in UK-EU relations, with both sides set to meet on May 19.
Talks are initially centred on defence, but closer regulatory alignment may emerge over the coming months, noted ING.
“Though the economic impact may not be huge, positive headlines over coming weeks might prompt a bit of a hawkish repricing of Bank of England expectations, given there are now three cuts priced over the next four meetings.”
Yen rebounds after losses
Elsewhere, USD/JPY traded 0.4% lower to 144.87, benefiting to a degree from the dollar weakness.
The yen was battered this week by dovish comments from the Bank of Japan, which sparked doubts over whether more interest rate hikes were even coming this year.
USD/CNY traded flat at 7.2714 in holiday trade, even as China’s commerce ministry said on Friday that it was open to dialogue with the U.S. over a bitter trade dispute between the two countries.