FOREX-Dollar poised for weekly loss, all eyes on US jobs data

By Johann M Cherian, Rae Wee

June 6 (Reuters) - The dollar was headed for a weekly loss on Friday, undermined by signs of fragility in the U.S. economy and little progress on trade negotiations between Washington and its partners, ahead of a critical jobs report.

The U.S. nonfarm payrolls report expected later on will draw greater scrutiny after a slew of weaker-than-expected economic data this week underscored that President Donald Trump's tariffs were taking a toll on the economy.

Analysts say the data so far has indicated that the U.S. economy faces a period of increasing price pressures and slowing growth, which could complicate Federal Reserve monetary policy, even as Trump has been critical of the institution's cautious stance.

Job growth likely slowed considerably in May as businesses struggled with headwinds from tariff uncertainty, but probably not enough to budge a cautious Federal Reserve.

Economists polled by Reuters forecast the U.S. economy created 130,000 new jobs in May versus 177,000 in April, while average earnings are expected to have increased marginally month-on-month.

"We will be watching the wages growth data today very closely. If there is no major surprise to the upside we think that a weak report could eventually boost expectations of Fed rate cuts," said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank said.

"The Fed expectations are massively dependent on the inflation trajectory and the inflation trajectory seems higher these days."

Friday's U.S. jobs data would likely be the next catalyst for currencies, at a time when investors have questioned the dollar's prized safe-haven status.

The yen JPY=EBS slipped 0.35% to 144.12 per dollar in choppy trading, while the Swiss franc CHF= dipped to 0.82.

Sterling GBP=D3 slipped 0.18% at around $1.35 having scaled a more than three-year peak in the previous session, and was set to rise about 0.6% for the week.

Against a basket of currencies, the dollar =USD edged up to 98.9, and was headed for a weekly loss of 0.5%.

ECB OUTLOOK, TRADE TENSIONS

The euro EUR=EBS was taking a breather after hitting a 1-1/2-month top on Thursday following hawkish remarks from the European Central Bank. It last bought roughly $1.1423, down just 0.18% on the day.

Traders have pushed back expectations on the timing of the next rate cut, but continue to anticipate a 25-basis point reduction by year-end. 0#EURIRPR

Deutsche Bank's Mark Wall said he still expects 50 basis points worth of ECB rate cuts, adding "it is still too early to judge the impact of the trade war, and the path of the trade war is in any case still inherently unpredictable."

Reflecting a struggling economy, data showed that German exports and industrial output fell more than expected in April.

Most currencies had surged against the dollar late on Thursday, helped by news that Trump and Chinese President Xi Jinping spoke on a call for more than an hour, before paring some of their gains.

Investors remain worried about U.S. trade negotiations and the lack of progress in hashing out deals ahead of an early July deadline.

The highly anticipated call between Trump and Xi also provided little clarity and the spotlight on it was quickly stolen by a public fallout between Trump and Elon Musk.

Elsewhere, cryptocurrency dogecoin DOGE=KRKN, often supported by Musk, was a touch firmer after falling to a one-month low on Thursday.

Bitcoin BTC= jumped 3.4% to $103,942, rebounding from Thursday's one-month low. Ether ETH= similarly rose 3.8% to $2,490.57.

"Despite escalating U.S.-China tensions, including expanded tech sanctions and higher steel tariffs, bitcoin has remained resilient," said Gracie Lin, OKX's Singapore CEO.