Report on US employment and ECB policy in the spotlight

The dollar was under pressure on Friday and was on the verge of its worst weekly performance of the year, as investors waited for a key report on US employment that should confirm the expectations of a near-term reduction in rates. the US Federal Reserve to support a slowing economy.

The review of the European Central Bank's policy last Thursday did not help the US currency. It has refrained from hinting at a cut in interest rates and has instead postponed the timing of its first rate hike since the 2008 financial crisis.

Market participants immediately focused on US non-farm payroll data for May, expected later on Friday, and the warning signs were not good, with hirings expected to fall an impulse to the rates of doves and dollars.

The ADP National Employment Report released on Wednesday, which said US private employers created 27,000 additional jobs in May, the smallest monthly gain in more than nine years, was a slowdown in the US labor market.

"The ADP report was unexpected, so it's hard to know what to expect" data on employment in the US, said Yukio Ishizuki, currency strategist at Daiwa Securities.

The dollar has been hit in recent weeks by rising expectations regarding a US rate cut before the end of the year, in parallel with the escalation of China and the United States. trade disputes undermine business confidence and growth Recent comments by Fed officials have also indicated easing in the coming months.

The markets expect a little over 50% probability, rates will be reduced by 25 basis points by the end of July and another reduction by the end of the year, according to the FedWatch tool of the CME group.

Against a basket of six peers, the dollar index was slightly lower at 97.029, trading at around 0.3% above the 96-week low of 96,749 on Wednesday.

The index was on the road to a 0.75% loss this week, its worst weekly performance since the beginning of December last year.

The euro surged by half a percent in the previous session, as markets were positioned on a more accommodating signal from the ECB and on the recognition of weak economic growth in the euro area. block.

The single currency remained stable at $ 1.1275 and forecast a weekly gain of almost 1%, its best weekly performance against the dollar since the end of September last year, while the US economy was up. it had increased by almost 1.1%.

"I think the ECB's policy was rather accommodating given the extension of the forecast, but the market was hoping the bank would be even more accommodating," said Ishizuki of Daiwa.

Elsewhere in the currency market, the dollar was up 0.05% to 108.455 yen.

Market participants also kept an eye on the evolution of Washington's trade negotiations with China and Mexico.

US President Donald Trump announced on Thursday that he would decide to implement his threat to hit China with tariffs of at least $ 300 billion on the country's goods after a G20 meeting at the end of the month.