The dollar remained under pressure on Thursday as investors awaited crucial US employment data. The yen stabilised after the historic US–Japan intervention, while the euro held near $1.155 amid hopes of easing geopolitical tensions.
BRUSSELS, August 6, 2026 — Foreign-exchange markets traded within relatively narrow ranges on Thursday as investors assessed softer US employment indicators, uncertainty surrounding negotiations with Iran and the consequences of the recent coordinated intervention to support the Japanese yen.
The US Dollar Index, which measures the greenback against six major currencies, traded near 99.70, close to its lowest level in approximately six weeks.
The euro remained one of the stronger major currencies, holding around $1.155, while sterling traded close to $1.347. The Japanese yen was little changed near ¥157.75 per dollar, surrendering part of the sharp advance triggered by last week’s intervention.
Friday’s official US employment report is now expected to determine the dollar’s next significant move.
Dollar struggles for direction
The dollar’s recent decline reflects a combination of weaker US hiring data and reduced demand for geopolitical protection.
Private-sector employers added only 44,000 jobs in July, according to ADP, below market expectations and down from a revised 95,000 in June. The figures raised questions about the resilience of the US labour market before the government’s official employment report.
At the same time, possible diplomatic progress involving the United States and Iran has reduced some of the safe-haven demand that supported the dollar during the escalation of the Middle East conflict.
Foreign-exchange markets are nevertheless reluctant to price a sustained decline in the American currency. US inflation remains elevated, while Federal Reserve officials have indicated that additional interest-rate increases may still be necessary.
The dollar consequently faces opposing forces:
- Softer employment data are limiting expectations of tighter monetary policy.
- Persistent inflation still supports the possibility of another rate increase.
- Geopolitical de-escalation reduces demand for the dollar as a haven.
- High US yields continue to make dollar-denominated assets attractive.
This combination explains why the currency remains near recent lows without experiencing a more decisive sell-off.
Euro holds near $1.155
The euro traded around $1.1555, close to its strongest level in roughly six weeks.
A weaker dollar has been the principal driver of the euro’s advance, although the single currency has also benefited from lower oil prices. The euro area imports a substantial share of its energy, meaning that a reduction in geopolitical and oil-supply risks can improve its economic outlook and terms of trade.
Encouraging German industrial-order data provided additional support on Thursday. Orders increased 3.1% month on month in June, substantially exceeding forecasts.
The headline figure was influenced by several large contracts, however, and orders excluding these major transactions declined by 0.5%. The data therefore offered some reassurance without confirming a broad manufacturing recovery.
The euro’s next move will probably depend more on US developments than European indicators. A weak American employment report could allow EUR/USD to challenge the $1.16 area, while stronger hiring or wage growth could send the pair back towards $1.15.
Yen stabilises after historic intervention
The Japanese yen remained the principal focus of the global currency market.
USD/JPY traded near 157.75, after briefly rising above 163 before Japan and the United States intervened to support the Japanese currency.
Japan reportedly spent approximately $36.6 billion during the latest operation.
The American participation made the action especially significant. According to Reuters, the US Treasury reportedly purchased yen by selling euros rather than dollars—an unusual structure that may have been designed to assist Japan without signalling that Washington wanted broad dollar depreciation.
The intervention successfully interrupted speculative yen selling, but its longer-term effectiveness remains uncertain.
A recent survey of currency strategists found that the yen could weaken towards 159 per dollar over the next three months, before recovering to around 157 in six months and 154 within a year. Analysts generally believe that intervention alone cannot produce a lasting appreciation.
For that to happen, at least one of the following would probably be required:
- Additional interest-rate increases from the Bank of Japan.
- Lower US interest rates.
- A sustained decline in global energy prices.
- Greater repatriation of overseas assets by Japanese investors.
- A durable narrowing of the US–Japan yield differential.
The possibility of further official action should nevertheless make traders more cautious about pushing USD/JPY rapidly back above 160.
Intervention changes the risk calculation
The coordinated operation has implications extending beyond the Japanese currency.
Currency intervention is most effective when it changes speculative behaviour. Traders who previously regarded yen weakness as a relatively straightforward trend must now consider the possibility of another sudden and potentially costly official response.
The mechanics of the intervention also matter for bond markets. Japan holds substantial quantities of US government debt, and investors had feared that Tokyo might need to sell Treasuries to finance continued yen purchases.
Japan’s reported use of the Federal Reserve’s foreign official repo facility could help it obtain dollar liquidity without rapidly liquidating Treasury holdings. This may reduce the risk of intervention contributing to higher US government-bond yields.
The bilateral nature of the operation was equally notable. Previous major interventions often involved broader cooperation among Group of Seven governments. This time, the United States and Japan acted without an obvious collective G7 initiative.
Sterling steady after stronger services data
The British pound held close to $1.347, while the euro traded at approximately 85.6 pence.
Sterling received some support from an improvement in UK service-sector activity. New orders and business confidence strengthened in July as companies became more optimistic about the economic outlook.
Lower oil prices would also benefit the United Kingdom by easing imported inflation. However, the pound lacks a decisive domestic catalyst, leaving it highly sensitive to changes in the dollar and global risk sentiment.
The UK fiscal outlook remains another source of uncertainty. Government discussions about using revised fiscal rules to increase investment could support economic activity, but additional borrowing may place upward pressure on gilt yields.
For now, GBP/USD remains largely caught between the dollar’s recent weakness and continuing concerns about British inflation and public finances.
Australian and New Zealand dollars remain subdued
The Australian and New Zealand dollars recorded only modest movements as weaker Asian equity markets limited demand for risk-sensitive currencies.
The Australian dollar traded around $0.705, supported by relatively resilient commodity prices but constrained by the sharp technology-sector sell-off in Asia.
The New Zealand dollar remained near $0.587 after the country’s unemployment rate climbed to 5.6%, its highest level in approximately a decade. The deterioration in the labour market reinforced expectations that New Zealand monetary policy may remain less restrictive than in the United States.
Both currencies are particularly sensitive to developments in China, commodity prices and global risk appetite. A sustained correction in technology shares or renewed geopolitical escalation would probably place them under pressure.
Oil and Iran talks influence currency trading
Foreign-exchange investors continue to monitor negotiations concerning Iran and the Strait of Hormuz.
Brent crude traded near $79 per barrel as markets considered whether diplomatic progress could reduce the threat to energy shipments. Lower oil prices generally support the currencies of energy-importing economies, including the euro, yen and pound.
The effect on the dollar is more complicated. Reduced geopolitical tension can weaken demand for the US currency as a haven, but lower energy costs may also improve the outlook for the American economy.
Reports surrounding a possible agreement remain contradictory. Investors should therefore expect currency markets to react quickly to any confirmed announcement concerning Iran, Oman or navigation through the Strait of Hormuz.
Friday’s US payroll report is the main event
The official July US employment report will be released on Friday. Economists surveyed by Reuters expect US nonfarm payrolls to increase by approximately 80,000 in July, with the unemployment rate holding at 4.2%.
Three components will be particularly important for currency traders:
- Payroll growth: A figure substantially below expectations would reinforce concerns about an economic slowdown.
- Unemployment: An unexpected increase could reduce expectations of additional Federal Reserve tightening.
- Average hourly earnings: Strong wage growth could maintain inflation concerns even if job creation weakens.
A disappointing report would probably push the dollar lower against the euro and pound. Its reaction against the yen could be larger because softer US data would reduce the interest-rate differential supporting USD/JPY.
Conversely, stronger-than-expected employment and wage figures could revive expectations of a September Federal Reserve rate increase, supporting the dollar and pushing Treasury yields higher.
Forex market outlook
The dollar remains vulnerable in the immediate term, but the case for sustained depreciation is not yet conclusive.
The US economy continues to offer higher interest rates than most other developed markets. Unless the employment report signals a more pronounced slowdown, investors may still find the dollar attractive.
The euro has positive momentum above $1.15, although its advance remains closely linked to dollar weakness and falling energy risk. Sterling is comparatively stable, while the yen faces the greatest potential volatility because of intervention risk.
Indicative levels to watch include:
| Currency pair | Indicative level | Key market factor |
|---|---|---|
| EUR/USD | 1.1555 | US employment and European energy costs |
| GBP/USD | 1.3470 | US data and UK inflation outlook |
| USD/JPY | 157.75 | Intervention and rate differentials |
| AUD/USD | 0.7050 | Asian equities and commodity demand |
| NZD/USD | 0.5870 | Weak New Zealand labour market |
| Dollar Index | 99.70 | Federal Reserve expectations |
The calm visible on Thursday may therefore be temporary. Between the US jobs report, possible Federal Reserve tightening, geopolitical negotiations and the threat of renewed yen intervention, the currency market has several potential catalysts for a much larger move.
Sources
- Reuters — Yen and dollar drift on Iran deal concerns and US payroll jitters — cours du dollar, de l’euro, de la livre et du yen, pétrole et attentes avant l’emploi américain.
- Reuters — Yen firms after landmark US–Japan intervention — intervention c oordonnée, évolution du yen et contexte géopolitique.
- Reuters — Yen reaches three-month high following intervention — estimation de 36,58 milliards de dollars consacrés par le Japon à l’intervention.
- Reuters — US–Japan intervention changes the traditional G7 framework — financement de l’intervention, rôle de la Réserve fédérale et implications pour les Treasuries.
- ADP — US private-sector employment increased by 44,000 jobs in July — rapport officiel sur l’emploi privé et les salaires.
- US Bureau of Labor Statistics — Employment Situation release schedule — confirmation de la publication du rapport de juillet le 7 août 2026 à 8 h 30, heure de New York.
- Destatis — German Federal Statistical Office — hausse de 3,1 % des commandes industrielles allemandes en juin.
- Reuters — UK services sector returns to growth in July — reprise des services, nouvelles commandes et confiance des entreprises britanniques.
- Stats NZ — Official unemployment-rate indicator — données officielles sur le chômage néo-zélandais.
- Reuters — New Zealand unemployment rises to 5.6% — chômage au plus haut depuis environ dix ans.
Exchange rates are indicative and may change during the trading session.
