Investing.com – The U.S. dollar was largely unchanged in early European trading on Friday, ahead of the release of key U.S. employment data, while the euro strengthened following a historic rate cut by the European Central Bank.

At 0500 ET (0900 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading unchanged at 104.060.

The dollar awaits the monthly employment report

The dollar has fallen this week, with the index down 0.5% so far this week as easing labor market conditions in the United States strengthen the case for Fed rate cuts this year.

Weekly jobless claims rose just above last week’s upwardly revised 221,000, supporting the market narrative this week that labor market stress is easing.

Next up is the long-awaited monthly magazine.

The world’s largest economy is expected to have added 185,000 jobs last month – slightly up from 175,000 in April, which was the smallest enhance in half a year. The rate is expected to remain below 4% for the 28th consecutive month.

The jobs report could prove the economy is losing momentum if it shows the slowdown in job creation continues, but a positive surprise could cause a shock for the dollar.

Markets have priced in nearly 50 basis points of Fed rate cuts this year, with the first due in September.

Traders reassess ECB rate cut

fell 0.1% to 1.0884, rebounding from a two-and-a-half-month high of 1.0916 hit earlier this week as investors assessed the European Central Bank’s first result since 2019.

At the same time, the central bank raised its inflation forecasts and the president refused to confirm at a press conference that he had entered the “winding back” phase of his restrictive monetary policy.

“Lagarde’s comments at the press conference – which pointed to the level of restrictions still needed, the high dependence on data and the fact that one member of the Governing Council opposed yesterday’s decision to cut interest rates – suggested that the ECB had indeed not yet made any decision on no further steps,” ING analysts wrote in a note.

fell slightly to 1.2786, with sterling trading in a tight range ahead of another Bank of England rate cut later this month.

Upcoming BOJ Meeting Limit Ranges

In Asia, shares fell 0.2% to 155.33, mainly focused on next week’s meeting, during which the central bank is expected to start limiting bond purchases, tightening policy.

fell slightly to 7.2428, remaining near six-month highs following the release of the latest trade data from China.

China’s economic growth was stronger than expected in May, driven by forceful industrial production and overseas demand. As a result, the country also recorded a larger-than-expected surplus.

However, growth in China was much weaker than expected, indicating that local demand remains subdued as the broader economy struggles with an uneven economic recovery.