Before US jobs data, the dollar remains steady while sterling drops

The dollar was stable in Asian markets Friday, and it looked good to continue its longest weekly winning streak in more than a year. U.S. bond yields rose, and expectations for strong jobs data lifted the dollar against key currencies.

It advanced 0.5% against the yen to 158.405 yen and rose about 1% against the soft British pound, which fell to a 14-month low after selling in UK government bonds, known as gilts, and fears about British financial health grew. Investors are tracking U.S. employment data that is likely to push the dollar higher against other currencies around the world.

Continuous rise of dollar

The dollar traded little changed against the euro, at $1.0289, and rose slightly against the Australian and New Zealand dollars. The dollar index is set to advance for a sixth consecutive week, the longest such streak since an 11-week run in 2023, as the U.S. economy continues to give competition to the rest of the world.

In Asia, the index was unchanged at 109.33, with a 0.4% weekly gain. Chris Turner, head of markets for ING, said that “dollar bulls aren’t done yet” because a shakeout in long sterling positions is underway, and further upside could come from U.S. jobs data later Friday.

Major currencies experienced down fall

The dollar index has given strong support near the 108 level during the week but remains vulnerable to profit-taking. The British pound was down 0.23% at $1.2278 and fell to a 14-month low of $1.2239 on Thursday. Both the Australian and New Zealand dollars also were close to multiyear lows. The Australian dollar traded at $0.61905, above its low in 2022 of $0.6170.

The New Zealand dollar also touched close to its 2022 low of $0.5512 and last traded at $0.5587. The persistent frailty observed in these currencies underscores apprehensions regarding worldwide economic difficulties and a transition in investor sentiment favouring the U.S. dollar, bolstered by more robust economic indicators and elevated interest rates.

Rate cuts might hinder amid strong jobs data

U.S. nonfarm payrolls data is forecast to add 160,000 jobs in December, up from 227,000 in November, while the unemployment rate is expected to remain unchanged at 4.2%. If the numbers are better than anticipated, that will help arguments against Federal Reserve rate cuts even further, which should add to the selling pressure already seen in excessively volatile bond markets.

Philadelphia Fed President Patrick Harker recently signalled expectations for eventual interest rate cuts but said that an imminent cut isn’t needed. Stronger-than-expected jobs data would signal ongoing economic resilience, which may delay the Fed’s rate-cutting plans and keep bond markets on edge.

The market has scaled back expectations for cuts in the U.S. in 2025 to about 40 basis points as worries over inflationary policies of President-elect Donald Trump have driven longer-term yields higher.

Crypto influenced by bond market

The proposed pro-growth fiscal policies of Donald Trump are likely to have inflationary effects on markets such as bonds and cryptocurrencies and provoke some angst among the market participants in this regard. The yield on the ten-year treasury has risen this week alone by nearly around 9 basis points to 4.68% with respect to mid-September, accumulating an increase of 96 basis points since then.

The same has been the case for the ten-year gilt, which has risen by 22 basis points to 4.805%. The other kinds of volatility in the bond markets seem to be affecting cryptocurrencies, with capitalized Bitcoin dropping by 6% to $94,066. Chris Weston, head of research at Pepperstone, says that for many of the people in the crypto community, it wouldn’t be difficult to understand what’s behind the very prices they see on U.S. rates and Treasuries, leaving them guessing about movements in the crypto market in general.

Pound and USD mixed signals

The GBP/USD pair faced some difficulty in the first full week of 2025, having evidently, but surely, been dominated by the sellers of Pound Sterling. Risk sentiment had gotten off to a goodish week owing to improving Chinese growth hopes and encouraging Caixin Services PMI data.

The People’s Bank of China (PBOC) promised vast financial investment support for technology innovation and consumption to prop up the economy. This announcement, flashed by Bloomberg, helped improve sentiment in markets and created a supportive backdrop for the Chinese economy. However, the pound found itself unable to catch a break, suffering dual blows in a global economy and internal troubles facing the UK’s currency.

Meanwhile, downside action on the safe-haven dollar, courtesy of the initially positive risk sentiment, paved the way for a higher-yielding British pound to extend its gains from the last week. However, the mood suddenly shifted once more due to the inflation fears that had returned from the events of the US President-elect Donald Trump’s immigration and trade policies. It was back on demand for the US dollar as a safe haven against the GBP/USD pair.