The US dollar edged lower on Thursday amid easing geopolitical concerns as US-Iran talks and diplomatic efforts continue.
Progress on this front could limit safe-haven demand and weigh on the dollar. However, any setbacks could drive more flows into the currency.
At the same time, market participants could adopt a more cautious stance ahead of the release of the closely watched US non-farm payrolls report.
Markets expect the economy to have created 110,000 jobs in June, while the unemployment rate is forecast to remain unchanged at 4.3%. Following yesterday’s softer-than-expected ADP employment figures, today’s data could affect monetary policy expectations.
Despite today’s decline, downside risks for the dollar may remain limited by elevated Treasury yields. The 2-year Treasury yield remained near a multi-month high. The Federal Reserve is still expected to raise its interest rates once before the end of the year. Another hike is anticipated at the beginning of next year, which could support the dollar over that time period.
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