The U.S. dollar edged higher Friday, rebounding after dropping from multi-month highs in the previous session, as traders digested disappointing labor market data.

At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 99.700, remaining in the same trading range it has sat in since August.

Labor market data in focus

The greenback fell on Thursday after Challenger Job Cuts data showed U.S. layoffs surged to a two-decade high in October, at over 150,000 cut positions. 

The print raised concerns over a rapid cooling in the labor sector, and also spurred bets that the Federal Reserve will cut interest rates again to stave off further weakness in the labor market.

“Having been bid for a week, the dollar finally softened yesterday. The catalyst appeared to be some Challenger layoff data and also some alternative data suggesting October’s NFP [nonfarm payrolls] report, which we were meant to see today, should have fallen by 9k,” said analysts at ING, in a note.

The greenback had been on the rise, buoyed by growing bets that the Federal Reserve will not cut interest rates in December after Chair Jerome Powell warned that a reduction at the final meeting of the year was not a given.

“DXY [the dollar index] has stalled at the top of the three-month trading range and we expect it to come lower. It’s not clear what will drive lower today, though,” ING added. 

Sterling faces weakness

In Europe, GBP/USD slipped 0.2% to 1.3104, the day after the Bank of England held interest rates steady on a 5-4 decision, with Governor Andrew Bailey casting the deciding vote. 

“It now seems Governor Andrew Bailey is the swing voter and minded for a December cut,” said ING. “That outcome is only priced with a 70% probability right now, meaning that there is scope for lower short-term rates and a weaker pound.”

EUR/USD slipped 0.1% to 1.1536, edging away from a one-week high, even after data showed that German exports rose by 1.4% in September compared with the previous month, more than the 0.5% increase expected.

“There is a chance that EUR/USD may have established an important low at 1.1470 this week,” said ING. “But for a rally to unfold, we will probably need to get more clarity on the slowing U.S. jobs market.”

Yen slips slightly 

In Asia, USD/JPY traded 0.3% higher to 153.44, after data, released earlier Friday, showed household spending grew less than expected in September.

That said, the pair is on track for a weekly loss after the release of strong wage growth data earlier in the week provided the Bank of Japan with more impetus to hike interest rates. 

USD/CNY traded 0.1% higher to 7.1222 after data showed China’s trade surplus unexpectedly shrank in October. China’s exports contracted for the first time since March 2024.

China’s imports also grew at a much slower rate than expected, signaling that domestic demand in Asia’s largest economy remained weak. 

AUD/USD gained 0.1% to 0.6482.