Dollar strengthens ahead of key payrolls release; Turbulence in the Middle East helps By Investing.com

Investing.com – The U.S. dollar rose on Thursday, benefiting from strong employment data as well as uncertainty caused by unrest in the Middle East.

At 04:30 ET (0830 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, traded 0.2 percent higher at 101,597, not far from its most recent high from the last three weeks.

Strong labor market data boosts dollar

The dollar got a boost from Wednesday’s report showing a bigger-than-expected increase of 143,000 jobs in the US last month.

This followed Tuesday’s stronger-than-expected reading in the US and raised expectations for a healthy reading on Friday, which could lead to an adjustment in the market’s view on the likely pace of Fed easing.

“Year-end Fed funds pricing continues to largely include a 50bp cut in either November or December, meaning room for further realignment with less accommodative Fed rhetoric and consequent risks of growth for the dollar,” ING analysts said in a note.

“We feel the bar for a negative reaction to the dollar on today’s and tomorrow’s US data is likely higher following Fed Chair Jerome Powell’s recent pushback against 50bp cuts.”

The market currently sees a roughly 37 percent chance of another 50-basis-point U.S. interest rate cut on Nov. 7, according to CME Group’s (NASDAQ: ) FedWatch tool, following the Fed’s huge cut last month.

The US safe haven currency has also been in the news as tensions have escalated in the Middle East following Iran’s ballistic missile attack on Israel.

Euro weakens due to cooling inflation

In Europe, it traded 0.1% lower at 1.1035, with the single currency retreating near a three-week low on further signs of cooling inflation in the euro zone.

Data on euro zone activity came in slightly stronger than expected in September, according to data released early Thursday, but data for the region remained in contraction territory.

The European Central Bank’s normally shock policymaker dropped her long-standing warning about the difficulty of taming rising prices in a speech on Wednesday, raising expectations of another interest rate cut later this month .

GBP/USD fell 1% to 1.3133, hitting a two-week low after the Bank of England governor said in an interview that the central bank could become “a bit more activist” on cutting interest rates if there was still good news about inflation.

Yen falls to six-week low

rose 0.1 percent to 146.53, with the pair climbing to a six-week high after Japan’s new prime minister said Wednesday, following a meeting with the central bank governor, that he expressed caution about the need for additional interest rate increases.

The Bank of Japan’s July meeting, released earlier this week, also showed policymakers divided on how quickly the central bank should raise interest rates.

it was largely unchanged at 7.0185, with Chinese markets now closed until Tuesday next week when the country celebrates Golden Week.