FX alert: Data at the wheel as FX slips into neutral

FX slips into neutral

This feels like one of those sessions where the market simply refuses to reveal its hand. Too many cross-currents, too many unresolved catalysts, and not enough conviction for traders to press risk in either direction. When that happens, desks default to survival mode. Risk neutral, light footprints, and a collective decision to let the data speak first. The problem so far is that the data has been mumbling.

The dollar is holding together not because it has momentum, but because nothing has decisively knocked it off balance. Yesterday’s US numbers read like a tape that could not agree with itself. Payroll proxies landed close enough to expectations to keep hopes of a solid jobs report alive, but not strong enough to force a rethink on policy. At the same time, softer job openings quietly reminded the market that the labour engine is losing torque. Strong services activity offset that weakness, leaving rates traders staring at a curve that refuses to commit. When the macro signals cancel each other out, FX defaults to range trading and patience.

That indecision has created a curious backdrop in which the dollar has managed to remain supported even as oil prices decline. Normally, softer crude would offer more immediate relief to currencies like the euro and the yen, and that relationship is still there beneath the surface. But for now, the market is giving more weight to expectations than spot moves. The assumption is that Friday’s jobs report will be respectable rather than spectacular and that it will not reopen the door to aggressive easing. That expectation alone is enough to put a floor under the dollar ahead of the release.

Layered on top of that is tomorrow’s Supreme Court ruling on tariffs. The prevailing view is that the outcome will remove some of the tariff overhang. Paradoxically, that could still support the dollar in the short run. The tariff channel has bitten harder into employment expectations than inflation, and any perception that trade uncertainty is easing risks nudging the rate path in a slightly more hawkish direction. Markets trade reaction functions, not headlines, and even a modest repricing of the Fed curve can be sufficient to steady the U.S. dollar into the event.

Once the job numbers are out of the way, the oil story may reassert itself. The energy market is clearly taking the prospect of increased Venezuelan supply seriously, and if crude remains heavy after payrolls, that softness could quietly cap any post-data dollar rally. Seasonality may be supportive, but it rarely wins outright when fundamentals lean the other way.

On the European side, the euro is drifting rather than driving. Inflation prints in the core were close enough to expectations to leave policy assumptions untouched, especially given how firmly the central bank has leaned against premature dovish bets. Even encouraging factory orders have failed to stir spot, which tells you all you need to know about the market’s current focus. This is not about cyclical data. It concerns geopolitics and Federal Reserve policy clarity.

Attention is divided between the north and the eastern Europe. Developments around Greenland are being watched more closely than traded, with currency markets showing little appetite to price scenarios that remain speculative and border on the absurd. In the east, incremental steps toward a possible peace framework have been met with indifference. Until something concrete lands, FX will treat all these headlines as background noise rather than a tradable shock.

For now, there are no axes to grind. Without a clearer signal of what the Federal Reserve will actually do, rather than what the market assumes it might do, conviction remains elusive. This is a waiting game. Data has the wheel, but it has not yet chosen a direction. Traders are strapped in, engines idling, eyes fixed on Friday.