Dollar edges higher as investors weigh economic data

The US Dollar strengthened against major currencies on Wednesday, supported by stronger-than-expected economic data and continued uncertainty surrounding negotiations between the United States and Iran.

Investors are now turning their attention to key labour market data due later this week, including weekly jobless claims and the closely watched Nonfarm Payrolls report for May.

The Dollar's gains came after fresh economic indicators pointed to continued resilience in the US economy.

Data released on Wednesday showed that employment in the private sector increased by 122,000 jobs in May.

The figure exceeded market expectations of 117,000 and followed a revised increase of 105,000 in April.

Strong US data support the dollar

Additional support for the US currency came from the services sector.

The Institute for Supply Management's Services Purchasing Managers' Index (PMI) rose to 54.5 in May from 53.6 in April.

The reading indicated that business activity in the services sector continued to expand and did so at a faster pace than in the previous month.

Following the release of the data, the US Dollar Index climbed above the 99.50 mark, reaching its highest level since early April.

The index later entered a consolidation phase and remained close to that level during the early European trading session on Thursday.

Meanwhile, sentiment in equity markets remained cautious.

US stock index futures traded mixed after major Wall Street benchmarks ended Wednesday's session sharply lower.

Geopolitical developments remain in focus

Geopolitical developments also remained a key consideration for investors.

Israel and Lebanon agreed on Wednesday to renew a ceasefire arrangement.

According to a joint statement issued following US-led talks in Washington, the agreement would require a complete cessation of fire by Iran-backed Hezbollah.

At the same time, uncertainty surrounding negotiations involving Iran continued.

Iran's Foreign Minister Abbas Araghchi said contact with the United States had not been severed but noted that negotiations aimed at ending the Middle East conflict .

Major currency pairs under pressure

In foreign exchange markets, the euro remained under pressure after losses recorded on Wednesday.

EUR/USD traded largely unchanged around the 1.1600 level during the early European session after declining approximately 0.3% in the previous session.

The Japanese yen recovered modestly against the US Dollar, with USD/JPY retreating below the 160.00 level after a four-day rally.

Japanese Prime Minister Sanae Takaichi stated on Wednesday that authorities remained prepared to respond to exchange-rate movements when necessary.

Sterling also struggled to recover from the previous session's decline.

GBP/USD, which lost more than 0.3% on Wednesday amid broad-based Dollar strength, continued to trade near the 1.3400 level on Thursday morning.

Gold rebounds, Australian dollar stabilises

Gold prices staged a recovery after experiencing significant losses earlier in the week.

The precious metal traded above $4,450 after falling more than 1% during Wednesday's session.

In Australia, Reserve Bank of Australia Governor Michele Bullock reiterated the central bank's commitment to tackling inflation while appearing before the Senate Economics Legislation Committee.

Bullock stated that inflation remained too high and emphasised that the board would take whatever actions it deemed necessary to fulfil its mandate of achieving price stability and full employment.

Following Wednesday's decline, the Australian dollar traded in a relatively narrow range.

AUD/USD remained above the 0.7100 level during the early European trading session on Thursday.

Market participants will now closely monitor the release of US weekly Initial Jobless Claims data before shifting their focus to Friday's Nonfarm Payrolls report, which is expected to provide further insight into the strength of the US labour market and the broader economic outlook.