Forex markets stay cautious ahead of US inflation, GDP and jobs data

The US Dollar Index edged lower on Thursday after rising for three straight sessions and touching its highest level in 13 months, as investors turned their attention to a heavy slate of US economic data and ongoing geopolitical tensions.

The US Dollar Index, after rising to 101.80 on Wednesday, eased in early Thursday trade but stayed firmly above the 101.50 mark.

The move came after the greenback maintained strong momentum in the previous session as investors continued to avoid risk-sensitive assets.

Later in the day, the US Bureau of Economic Analysis is scheduled to release the Personal Consumption Expenditures (PCE) Price Index for May, alongside Personal Spending and Personal Income figures.

Markets are also awaiting the final revision to first-quarter Gross Domestic Product growth.

In addition, Durable Goods Orders for May and weekly Initial Jobless Claims are due on the US economic calendar.

Dollar rally pauses before data-heavy session

The dollar’s recent advance has been underpinned by a cautious market mood.

Investors remained defensive through the middle of the week, helping the US currency retain its bullish tone.

However, sentiment appeared to improve slightly in the European session on Thursday.

Geopolitical tensions remain in focus

Fresh developments in the Middle East added to market caution.

On Thursday, Iran’s Revolutionary Guard rejected a proposal for a shipping route through the Strait of Hormuz and warned that any vessel using it would be in danger.

Earlier this week, Israeli Defence Minister Israel Katz said in an interview in Tel Aviv that the Israeli military would not withdraw from southern Lebanon despite pressure from the United States.

Ongoing fighting in Lebanon remains an obstacle to a lasting peace settlement.

These developments helped keep investors alert even as equity futures pointed to a firmer open.

Euro, pound, and yen trade in narrow ranges

In the currency market, the euro remained under pressure after losses in the previous session.

EUR/USD traded in a tight range near 1.1350 in early Thursday dealings after falling 0.2% on Wednesday.

Sterling was relatively stable.

GBP/USD held above 1.3150 in the European morning after retreating on Wednesday.

The Japanese yen remained in focus as USD/JPY continued to push higher toward 162.00 after posting marginal gains in the previous session.

The move kept intervention concerns alive.

Bank of Japan board member Naoki Tamura said on Thursday that Japan had already achieved the central bank’s 2% inflation target.

He added that the Bank of Japan must raise interest rates closer to a neutral level in order to prevent underlying inflation from overshooting the target.

Rupee gains as oil prices decline

Among Asian currencies, the Indian rupee traded firmly against the US dollar on Thursday.

USD/INR slipped toward 94.30 as the rupee drew support from a further decline in oil prices.

The move suggested that softer crude prices were helping improve sentiment toward the Indian currency, even as the dollar stayed broadly resilient elsewhere.

Australian jobs data offers support

The Australian dollar also found some stability after the domestic labour market data.

Australia’s unemployment rate edged lower to 4.4% in May from 4.5% in April, in line with expectations.

Full-time employment rose by 5,200 during the month after a decline of 21,700 in April.

AUD/USD struggled to build a meaningful recovery but managed to steady near 0.6900 in European trading.

Markets await next catalyst

For now, the focus remains on the US data calendar.

Inflation readings, growth revisions, and labour market indicators are likely to determine whether the dollar can resume its climb after a brief pause.

With geopolitical risks still elevated and global currencies trading in tight ranges, Thursday’s data releases could set the tone for the next move across foreign exchange markets.