US Dollar Price Forecast Ahead of Nonfarm Payrolls as EUR/USD and GBP/USD Test Key Resistance

US Dollar awaits Nonfarm Payrolls as markets reassess Fed outlook

The US Dollar remained in focus on Thursday as traders positioned ahead of the July Nonfarm Payrolls report, widely regarded as the week’s most important economic release. Following a string of softer US economic indicators, investors have reduced expectations for another Federal Reserve rate increase, leaving Friday’s labour market data as the next major test for the greenback.

Recent declines in JOLTS job openings, weaker factory orders and softer private-sector hiring have fuelled speculation that the US labour market may finally be cooling after months of resilience. While Federal Reserve officials continue to insist that policy decisions remain data dependent, markets are increasingly looking for evidence that inflation pressures are easing enough to allow interest rates to remain unchanged.

A stronger-than-expected payrolls report would likely revive demand for the US Dollar by supporting higher Treasury yields and reinforcing expectations that the Fed could maintain a restrictive stance for longer. Conversely, another disappointing employment report could increase pressure on the dollar as investors scale back expectations for additional policy tightening.

EUR/USD Price Forecast: Euro Holds Near Seven-Week High as German Factory Orders Beat Forecasts

EUR/USD remains one of the most closely watched currency pairs ahead of Friday’s US Nonfarm Payrolls report, with the euro holding near the 1.1550 level after mixed economic data from the Eurozone. Germany’s factory orders unexpectedly rose 3.1% in June, comfortably beating market expectations and signalling that Europe’s largest economy continues to show resilience despite elevated borrowing costs and global uncertainty. However, the positive manufacturing data was partly offset by weaker Eurozone retail sales, which fell 0.3% in June, highlighting that consumer demand remains fragile.

The mixed data has done little to derail the euro’s recent recovery, as investors continue to trim expectations for aggressive Federal Reserve tightening. With EUR/USD trading near its highest level since mid-June, markets are now looking to Friday’s US jobs report to determine whether the pair can extend gains toward the 1.1600 psychological level or retreat as the dollar attempts to recover.

GBP/USD Price Forecast: Pound Holds Firm Ahead of US Nonfarm Payrolls Report

Sterling continues to outperform against the US dollar, with GBP/USD remaining close to recent highs as traders balance a resilient UK economy against growing uncertainty over US monetary policy. The Bank of England’s cautious approach to interest rates, combined with easing expectations for further Federal Reserve tightening, has provided steady support for the pound in recent sessions. Investors are also monitoring incoming UK economic data, including construction activity and labour market indicators, for fresh clues on whether the BoE will need to keep policy restrictive for longer.

However, the biggest catalyst for GBP/USD remains Friday’s US Nonfarm Payrolls report, which is expected to shape expectations for the Fed’s September meeting. A softer-than-expected payrolls reading could weaken the US dollar further and allow sterling to challenge the 1.3500 resistance zone, while stronger employment data may trigger a pullback across major currency pairs.

US Dollar Outlook: Nonfarm Payrolls Set to Decide the Dollar’s Next Move

The US dollar remains the primary focus across global currency markets as investors position ahead of Friday’s closely watched Nonfarm Payrolls (NFP) report, the final major economic release before traders reassess the Federal Reserve’s September interest-rate outlook. The US Dollar Index (DXY) continues to trade below the psychologically important 100.00 level after retreating from recent highs, reflecting growing uncertainty over whether the Fed will need to tighten policy further to contain inflation. While Chair Kevin Warsh reiterated that policymakers remain committed to restoring price stability, recent economic data has painted a more mixed picture, prompting markets to dial back expectations for another immediate rate hike.

Recent labour market indicators have weakened the dollar’s momentum. ADP private payrolls growth slowed sharply in July, while JOLTS job openings and factory orders also disappointed, suggesting that hiring demand and business activity are beginning to cool. Investors will now look to Friday’s official employment report for confirmation on whether the slowdown is broadening across the US economy. A stronger-than-expected payrolls reading could revive expectations for another Fed rate increase and lift the dollar, while softer employment data would reinforce expectations that policymakers are nearing the end of the current tightening cycle.

Beyond the labour market, Treasury yields and broader risk sentiment remain key drivers of the greenback. The recent decline in oil prices following progress in US-Iran negotiations has eased inflation concerns, reducing pressure on the Federal Reserve to keep policy restrictive for longer. At the same time, improving investor appetite for risk has limited demand for the US dollar’s traditional safe-haven appeal. With the DXY sitting near a key technical support zone and major currency pairs approaching important resistance levels, Friday’s Nonfarm Payrolls report is widely expected to determine the next major direction for the US dollar and the broader foreign exchange market.