Euro eyes best week in 16 years as dollar softens ahead of jobs data

The euro was set for its best week in 16 years against the dollar on Friday, as Germany's game-changing fiscal reforms continue to attract buyers, while the greenback wallowed near a four-month low ahead of U.S. jobs data later in the day. It has been a volatile week for the currency market, driven mainly by U.S. trade and economic growth uncertainties and a pivotal development in Europe as its largest economy abandoned its fiscal constraints to boost spending and revive growth. "This week is a watershed moment ...because we've lived through a couple of years of dollar and U.S. growth exceptionalism and dollar strength," said Kenneth Broux, head of corporate research FX and rates at Societe Generale. Following a slew of mixed economic data out of the United States so far this week, the focus on Friday falls on U.S. nonfarm payrolls numbers as market participants will assess the health of the economy and its implications on inflation and interest rates. The U.S. dollar index is on course for its worst weekly performance since that of November 4, when Donald Trump won the U.S. election. The euro, on the other hand, is set for its biggest weekly jump since March 2009. "Right now we're in a situation where investors are buying dips in euro/dollar and I think payrolls today can only accelerate the move higher," Broux said. "I do not think that a stronger NFP print is going to stop this move higher in euro/dollar. It could slow it, but I don't think it's going to change the trend." The euro hit its highest level in four months in the previous session, lifted by the European Central Bank's hawkish rate cut and surging European bond yields on the back of Germany's massive spending proposal. 'FALLEN OUT OF FAVOUR' Another reprieve of levies aimed at Mexico and Canada announced by U.S. President Donald Trump on Thursday offered little relief to whiplashed markets. The greenback lost some ground against the Canadian dollar and Mexican peso following the announcement. The exemption expires on April 2 when Trump said he will impose reciprocal tariffs on all U.S. trading partners.The dollar has "fallen out of favour" amid the uncertainty, with the perceived inflationary impact of tariffs no longer enough to support it, said Kieran Williams, head of Asia FX at InTouch Capital Markets."Ahead of the NFP survey, evidence has tilted towards a softer outcome. If this transpires it could spook markets further," he said.Against a backdrop of federal job culls, the U.S. likely added 160,000 jobs in February compared with 143,000 in January, while the unemployment rate is expected to have held steady at 4.0%, economists forecast in a Reuters poll.Federal Reserve Chair Jerome Powell will be able to follow up the jobs report when he speaks later in the day on the economic outlook.Markets currently have three Fed rate cuts priced in for the rest of the year.The safe-haven yen is at its strongest against the greenback since early October, while the Swiss franc hit a three-month peak of 0.8838 . Japan's economy minister Ryosei Akazawa said the nation has cleared the key threshold for the government to officially declare an end to long-term price deflation.Elsewhere in Asia, the offshore yuan steadied at 7.2302. China's exports slowed over the January-February period and imports unexpectedly contracted, official data on Friday shows, as trade tensions escalated with the United States.The risk-sensitive Australian dollar slid 0.2% to $0.6320. In cryptocurrencies, bitcoin dropped after news that Trump had signed an executive order on Thursday to establish a strategic bitcoin reserve capitalised with tokens from criminal or civil asset forfeiture proceedings.The decline was likely largely because the order stated it will not require additional bitcoin, said Zann Kwan, chief investment officer of Revo Digital Family Office Bitcoin was last down 1% at $88,592.87.