The dollar is strengthening, the euro is falling: all attention is on the US labor market

The DXY dollar index soared to a 3-week high of 102.05, bringing the EUR/USD pair to strong support at 1.10. The dollar's recovery is driven by strong data on the US economy and labor market, as well as expectations of a slowdown in the Fed's rate cuts.

On Thursday, the dollar index reached a six-week high, supported by indicators of the service sector and a positive picture on the labor market. The probability of a Fed rate cut by 50 bps in November fell to 32%, which led to a 1.5% strengthening of the dollar over the week.

At the same time, the euro is losing 1.2% amid the likelihood of an ECB rate cut this month to 90%. The slowdown in inflation and the deterioration of the economic situation in the eurozone may force the regulator to soften the PREP.

On Friday, all attention will be focused on the Non-farm payrolls report on the US labor market. The number of employees is expected to increase by 150 thousand. High indicators can strengthen the growth of the dollar.

Against the background of geopolitical tensions in the Middle East, the USD/JPY pair is also strengthening, reaching 147.0. The Japanese authorities are not planning new currency interventions yet.

In the UK, the index of business activity in the service sector slowed down, but remained steady. The GBP/USD pair is trading around 1.315.