Investing.com – The US dollar retreated on Monday, paring some recent gains but remaining near two-year levels ahead of the release of key earnings data later this week.
At 05:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.4% lower at 108.380, a ' withdraw after reaching a promotion of more than two years last week.
Dollar starts the week on the backfoot
The greenback has started the new week on the back foot, as traders cautiously await Friday's release of the closely watched for further clarity on the health of the larger economy. in the world.
The report is expected to show that the world's largest economy added 154,000 jobs in December, which is expected to hold steady at 4.2%.
Such an outcome would bring the average monthly job gain for 2024 to about 180,000 – a slowdown from the past three years but still indicative of the underlying strength of the labor market.
This is unlikely to change the Federal Reserve's stance on interest rates, with the US central bank signaling just two more cuts this year, down from its previous forecast of four cuts.
There was also uncertainty about President-elect Donald Trump's plans for massive import tariffs, tax cuts and immigration restrictions when he was inaugurated on January 20.
“The dollar could lose some momentum this week as the return of normal market conditions allows some reconciliation with slightly lower rates. However, the proximity to Trump's inauguration and the Fed's strong hawkish rhetoric could keep any USD correction short-lived,” analysts at ING said in a note.
Euro bounces after PMI data
In Europe, it rose 0.5% to 1.0360, helped by a slight recovery in the euro area services industry in December.
The final HCOB for the bloc, compiled by S&P Global, rose to 49.6 in December from 48.3 in November.
The main index was boosted by the bloc's main services sector, whose PMI bounced back above balance to 51.6 from 49.5 in November, but was offset by a sharper decline in factory activity.
The euro fell to its weakest level in more than two years against the dollar last week, with traders expecting many more interest rate cuts from the European Central Bank in 2025 , with market prices in at least 100 basis points to discount.
for December later in the session, ahead of Tuesday's flash data, which are expected to show that inflationary pressures remain under control in the euro bloc.
traded 0.4% higher to 1.2473, benefiting from a dollar selloff after falling about 1.4% last week.
The Bank of England kept interest rates unchanged last month after consumer prices rose above target, and traders expect around 60 bps of cuts from the Bank of England in 2025.
Yuan is going down
In Asia, it rose 0.4% to 7.3466, with the pair rising to its highest level since early 2008, with the yuan's weakness driven by economic challenges and a widening output gap. with the US
To counter fears of a further devaluation, the People's Bank of China reaffirmed its commitment to support the yuan on Monday, setting its daily reference rate stronger than the critical level of 7.2 per dollar.
The December release on Monday failed to provide any support to the yuan, despite registering the fastest growth in seven months.
trading 0.3% higher to 157.75, despite data showing that the country's services sector grew for the second consecutive month in December, driven by strong demand and continued business expansion.
Elsewhere, it fell 0.5% to 1.4377, following reports that Canadian Prime Minister Justin Trudeau is set to resign, possibly as soon as later on Monday.
