The US Dollar Index (DXY) extended its losses for a second consecutive day, trading around 100.60 during early European hours on Friday, despite maintaining a bullish technical bias above the 50-day Exponential Moving Average (EMA) and within an ascending channel pattern [3]. The DXY was the weakest against the New Zealand Dollar (NZD), falling 0.51% on the day, and also declined 0.23% against the British Pound (GBP) and 0.25% against the Euro (EUR) [3][4]. The US Dollar's weakness was attributed to a cooling in hawkish Federal Reserve expectations, as the CME FedWatch tool showed the odds of a Fed rate hike in September dropped to 53.2% from nearly 64% earlier in the week, following a disappointing US Nonfarm Payrolls (NFP) report that showed only 57K jobs added in June versus estimates of 110K [4].
The British Pound continued its strong rally, with GBP/USD reaching a high of 1.3385 before closing at 1.3347, marking a sixth consecutive day of gains and a 0.57% daily increase [2]. UOB analysts noted the rally appears overbought but see scope for a retest of 1.3385 in the near term, with support at 1.3325/1.3300 and potential for further gains toward 1.3410 if the 1.3265 support holds [2]. Against the Euro, the Pound also strengthened, with EUR/GBP trading around 0.8565, near one-year lows for the Euro and on track for a 0.7% weekly decline [1]. The Euro's weakness was driven by softer-than-expected Eurozone inflation data and comments from ECB President Christine Lagarde, who signaled a likely pause in rate hikes at the July meeting [1].
The New Zealand Dollar outperformed all major currencies, with NZD/USD posting a fresh weekly high near 0.5725 [4]. The NZD gained 0.47% against the USD, supported by improved risk sentiment—evidenced by a 0.3% rise in S&P 500 futures to near 7,500—and expectations for a 25 basis point rate hike by the Reserve Bank of New Zealand (RBNZ) at its upcoming policy meeting [4]. Technical analysis showed NZD/USD approaching the 20-day EMA at 0.5733, with momentum indicators suggesting a recovery from oversold conditions [4].
In summary, the US Dollar's broad-based weakness, driven by softer US labor data and reduced Fed rate hike expectations, fueled gains in both the British Pound and New Zealand Dollar. The Euro remained under pressure due to dovish ECB signals and weak inflation data, with EUR/GBP trading near multi-month lows [1][2][3][4].
CONCLUSION
The US Dollar's decline, prompted by weaker US jobs data and fading Fed rate hike bets, has led to significant gains for the British Pound and New Zealand Dollar. The Euro remains subdued amid dovish ECB commentary and soft inflation, while risk sentiment has improved, supporting riskier assets. Market focus now turns to upcoming central bank decisions and further economic data for direction.