The weight is coming from softer U.S. yields and jobs data that raised more questions than answers. With the labor report distorted by the shutdown, traders aren’t leaning too aggressively in either direction, but the weaker unemployment reading is giving dollar sellers enough confidence to stay active.
Fundamentals Lean Soft as Yields Drift Lower
Treasury yields are sliding, and that alone takes some support out from under the dollar. The 10-year at 4.153% and the 2-year at 3.481% reflect a market that’s easing expectations for near-term economic strength. Lower yields cut the relative return on U.S. assets, and that tends to drag the DXY when sellers already have momentum.
The mixed employment picture isn’t helping. November added 64,000 jobs, but October’s revised 105,000 decline feeds the sense that the slowdown is real. The unemployment rate jumping to 4.6% gives traders another reason to expect the Fed to tread carefully. Even so, rate-cut odds barely moved — 24% for January — which keeps rate differentials stable but still tilted slightly against the dollar today.
For now, the market wants cleaner data before making any bigger call on Fed policy. Thursday’s CPI could reset expectations quickly, and traders know it.
Foreign Currencies Find Support Against the Greenback
Cross-currency flows are leaning against the dollar, reinforcing DXY weakness. The euro pushing to $1.1788 and marking a five-session run reflects both softer U.S. yields and mixed euro-zone data that still supports the ECB’s higher-for-longer stance. Sterling is catching a bid as well, trading at $1.3425 ahead of what could be a finely balanced BoE vote.
The yen’s reaction is more complicated, with a BoJ hike essentially priced in. Fiscal worries may cap yen strength, but even a steady yen is enough to keep pressure on the dollar when the broad tone is soft.
