Investing.com - The U.S. dollar saw a rise on Thursday, fueled by robust employment data and the uncertainty surrounding the Middle East unrest. At 04:30 ET (08:30 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, was up by 0.2% to 101.597, nearing its recent three-week high.
Strong labor market data boosts the dollar
The dollar received a boost from a report released on Wednesday, showing a larger-than-expected increase of 143,000 jobs in the U.S. last month. This, coupled with a stronger-than-expected reading on U.S. , has raised expectations for a healthy reading on Friday. This could potentially lead to a shift in the market's view on the pace of Fed easing.
Analysts at ING noted that the market currently anticipates a 37% chance of another 50 basis-point U.S. rate cut on Nov. 7, following the significant reduction made by the Fed last month. The safe-haven U.S. dollar also saw increased demand amidst rising tensions in the Middle East following Iran's missile attack on Israel.
Euro weakens on cooling inflation
The Euro traded 0.1% lower to 1.1035, nearing a three-week low due to signs of cooling inflation in the eurozone. Despite slightly stronger activity data for September, inflation data in the region remains in contraction territory. The European Central Bank is now expected to consider another interest rate cut later this month.
GBP/USD dropped 1% to 1.3133, hitting a two-week low after Bank of England Governor hinted at potential rate cuts if inflation continues to improve.
Yen falls to six-week low
The Yen rose 0.1% to 146.53, reaching a six-week high after Japan's new prime minister expressed caution over the need for additional interest rate hikes. The minutes from the Bank of Japan's July meeting revealed a division among policymakers on the pace of future rate hikes.
Meanwhile, the Chinese yuan remained stable at 7.0185 as Chinese markets are closed until next week for Golden Week celebrations.
Analysis:
The U.S. dollar strengthened on positive employment data and geopolitical tensions, while the Euro weakened due to cooling inflation. The Yen fell as Japan's prime minister expressed caution over interest rate hikes. Investors should monitor upcoming economic data releases and geopolitical developments to assess potential impacts on currency markets and adjust their investment strategies accordingly.