Economic Signals Weigh Down Dollar Amid Global Trade Tensions

The dollar is bracing for a weekly decline as indications of fragility within the U.S. economy and stalled trade negotiations impede its trajectory. Despite a looming deadline, diplomacy between Washington and its trading partners has made scant progress.

All eyes turn to the forthcoming U.S. nonfarm payrolls report, poised to offer critical insights following a week of lackluster economic data, highlighting the detrimental effects of President Trump's trade tariffs. Currencies made initial gains against the dollar, fueled by optimism from a Trump-Xi phone call, but reversed some advances shortly after.

The euro surged after the European Central Bank's hawkish stance post-rate cut, peaking at a 1-1/2-month high, while the dollar weakened, weighed down by U.S. trade uncertainties and fears of a flagging labor market. The global currency market remains on edge pending the release of U.S. job data.

(With inputs from agencies.)