The euro and pound were heading for weekly gains against the dollar on Friday, as the U.S.-led rally in global bonds sent yields down, and with them the dollar, bringing relief even to the embattled Japanese yen.
Always-crucial U.S. non farm payrolls data due at 1230 GMT – the most important data point in a packed week – could change that narrative completely however. The decline in the dollar after a very strong recent rally – the dollar index is on course to drop 0.4% for the week, just its third week of losses in the last 16 – mirrors a decline in U.S. yields. The benchmark U.S. 10 year treasury yield is heading for a 17 basis point weekly fall, its most in a week since July. That fall was sparked by a combination of the U.S. Treasury Department announcing smaller-than-expected increases in longer-dated Treasury supply, and Federal Reserve Chair Jerome Powell seeming more confident suggesting the Fed is done hiking interest rates at his press conference after their Wednesday meeting. Markets are now pricing in less than a 20% chance of a rate increase in December compared with 39% earlier in the week, CME FedWatch tool showed, even though the Fed officially left the door open to a further increase in borrowing costs in a nod to the economy’s resilience. But the week’s main event – U.S. payrolls – is still to come