The dollar enjoyed a fleeting rebound on Friday following unexpectedly strong U.S. jobs data but retreated to flat on the day after traders took the blip higher as a selling opportunity on the assumption that the Fed will have to cut rates in late 2023, no matter officials' attempts to persuade markets otherwise.
Treasury yields and the dollar spiked higher in the initial response to the jobs data nL1N32R2TN, in part because expectations had been dragged down by dour ISM manufacturing, ADP and Challenger job cuts data earlier in the week and by Fed Chair Jerome Powell's surprisingly un-hawkish comments on Wednesday.
But the dollar index rebound was rejected by the 200-day moving average it broke below on Thursday, with a bullish rejection of sterling's fleeting retreat to its 200-DMA.
EUR/USD was flat in late trade and its rebound from Friday's 1.04295 low on EBS toward to a high of 1.0545 put it on course for a bullish close above the 50% Fibo of this year's downtrend at 1.0511.
Two-year bund-Treasury yield spreads remain near their highest since June, with ECB Vice-President Luis de Guindos saying rates need to keep rising to reach the 2% inflation goal nL8N32S34E and European Central Bank President Christine Lagarde again warning some fiscal policies in Europe could fuel excess demand and result in higher rates nL1N32S07N.
The market is pricing ECB rates peaking in June by 2.81% and then slipping slightly to 2.71 by year-end.
USD/JPY fell 0.45% after its post-payrolls recovery to 135.98 on EBS from its pre-jobs report trend lows at 133.62.
Prices are now near the 200-DMA at 134.52 breached on Friday for the first time since February 2021.
Friday's lows had already taken prices 97% of the way to reaching key technical objectives at 132.55/46 from October's 32-year peak nL1N32S1AI.
The focus is now on Monday's ISM non-manufacturing report, after its dismal manufacturing data Thursday, then CPI on Dec.
13 and the Dec.
13-14 Fed meeting.
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