Forex Today: Markets kick off the fresh trading year with a fresh dollar offering

The US dollar climbed to the forex top on the first day of trading in 2025 as broader markets become firmly rooted in the safe-haven currency. Traders may not be the biggest fans of the US dollar politically, but the US dollar continues to be the de facto winner amid volatile economic conditions around the world.

Here’s what you need to know on Friday, January 3

The US Dollar Index (DXY) rose sharply to celebrate the start of the 2025 trading season, rising by approximately eight-tenths of one percent to hit 109.50 for the first time since November 2022. The only significant data from Friday’s economic calendar meeting are the results of the American ISM Manufacturing Purchasing Managers Index (PMI), which are expected to remain stable at 48.4 in December. A better-than-expected print of the weekly Initial Unemployment Claims in the US also helped to ensure macroeconomic dollar flow.

The EUR/USD rate has already fallen by more than 1% in January, falling to 1.0250 and on the first trading day of the fresh year, reaching its lowest levels in two years. Hopes for the euro remain dim, with investors broadly expecting the interest rate differential between the euro and the US dollar to continue to widen in the first half of 2025. Data on Germany’s average unemployment rate will be released early on Friday.

The GBP/USD pair fell on Thursday, falling 1.15% on the day and clearly breaking through the 1.2400 level, thus reaching a nine-month low. Cable will play second fiddle to other, more significant market influencers, with the UK largely absent from the economic calendar in the coming week.

AUD/USD continues to bottom out with price action approaching the 0.6200 area at the start of the fresh trading year. The Australian expected a technical recovery on the day, but broad market inflows into the Australian dollar kept AUD/USD near 27-month lows.

After Thursday’s intraday rebound, the USD/JPY pair is heading towards known highs near 158.00. The dollar-yen pair initially opened trading in 2025 on a downward trend, but overwhelming U.S. dollar bidding strength across the broader market helped reverse course and keep USD/JPY near six-month highs.

Economic indicator

Initial unemployment applications

Initial unemployment benefit claims published by US Department of Labor is a measure of the number of people filing for state unemployment insurance for the first time. The larger-than-expected number indicates weakness in the U.S. labor market, weighs negatively on the U.S. economy and is negative for the U.S. dollar (USD). On the other hand, a decreasing number should be considered an increasing one for the USD.