The dollar traded mixed on Thursday as traders digested central bank decisions and positioned ahead of Friday’s non-farm payrolls report. U.S. economic data pointed to a slight uptick in jobless claims, while Chicago Fed President Austan Goolsbee reiterated optimism about growth, full employment, and easing inflation, though he cautioned that Trump’s trade policies could impact the Fed’s easing path.

Sterling Slumps as BoE Delivers Dovish Rate Cut

The Bank of England cut rates by 25 basis points, but dovish guidance and two policymakers voting for a larger cut sent GBP/USD down 0.48% to 1.2361 before paring losses. BoE Governor Andrew Bailey signaled a gradual easing approach, citing economic risks, while gilt yields firmed, providing some pound stability.

Yen Strengthens on Safe-Haven Demand and Rate Speculation

The yen hit an eight-week high, with USD/JPY falling 0.69% as weak U.S. wage data and jobless claims fueled demand for safe-haven assets. The pair slipped below 151.81, triggering stop-loss selling under 151.50, reinforcing yen strength ahead of the BoJ’s potential tightening.

Euro Stays Range-Bound Amid ECB Rate Cut Expectations

The euro remained within a tight range, with EUR/USD down 0.18%, as ECB board member Piero Cipollone reaffirmed expectations for lower eurozone rates. Trade concerns and option expiries between 1.0320-1.0370 kept volatility in check.

Markets React to Central Bank Easing and Trade Uncertainty

• Treasury Yields: Rose 1-2 basis points, with the 2s-10s curve flattening slightly to +22.5bp.
• Equities: The S&P 500 rose 0.23%, reflecting investor caution ahead of U.S. jobs data.
• Oil: Fell 0.5%, after Trump pledged to boost U.S. production, fueling oversupply fears.
• Gold: Declined 0.5%, pulling back from record highs on rising yields.

Currency Market Summary: Yen and Dollar Dominate

• EUR/USD: Down 0.18%, struggling to gain traction despite short-covering.
• USD/JPY: Fell 0.69%, pressured by yen strength and stop-loss selling.
• GBP/USD: Dropped 0.48%, weighed by BoE rate cut expectations.
• AUD/USD: Flat at +0.04%, as risk flows remained muted.
• Cross-Currency Pairs:
  • EUR/JPY: Down 0.86%, reflecting risk aversion.
  • GBP/JPY: Fell 1.18%, tracking yen demand.
  • AUD/JPY: Declined 0.72%, mirroring commodity-linked risk-off sentiment.

Outlook: Markets Focus on U.S. Jobs Data for Direction

With Friday’s NFP report set to drive sentiment, volatility remains elevated. The dollar’s strength hinges on labor market resilience, while the yen could extend gains if risk aversion persists. The euro and pound face rate-cut pressures, and commodity-linked currencies remain vulnerable to trade uncertainties and risk sentiment shifts.