Dollar Finds Footing Ahead of Crucial Payrolls Report

The US dollar began the week on shaky ground due to reports of progress between Iran and Oman on reopening shipping routes through the Strait of Hormuz, which led to lower oil prices and improved risk sentiment.

This caused a rotation into higher-beta currencies and reduced some of the geopolitical premium embedded in the greenback.

The focus now shifts to today's payrolls report, which is seen as binary: another weak reading would strengthen the case for a prolonged Fed pause, while a stronger print would revive expectations of further tightening.

Fed officials' hawkish comments have helped push short-end Treasury yields higher and restored the relationship between the dollar and rates.

The euro has softened towards the end of the week due to a rebound in oil prices and hawkish Fed commentary, which revived demand for the dollar.