USD: After dominating markets for much of the past few weeks, the dollar is finally showing signs of taking a breather. Recent gains have been driven by a resilient US economy and relatively attractive yields, but investors appear reluctant to push the currency significantly higher from current levels. This feels less like the start of a reversal and more like a pause. The market still broadly favours the US outlook, but positioning has become crowded and traders are looking for the next catalyst before adding to long-dollar positions.

EUR: The euro remains stuck in a difficult position. UOB notes that EUR/USD continues to trade with a range-bound bias, but the broader trend remains fragile and rallies are struggling to gain traction.

The issue for the single currency isn’t necessarily a fresh negative headline, but rather the absence of a convincing positive story. Growth remains subdued across parts of the Eurozone and investor sentiment towards European assets remains cautious. As a result, any rebounds continue to look corrective rather than the start of a sustained recovery.

GBP: Sterling is the bright spot this morning.

Strong UK employment figures have given the pound a boost, reinforcing the view that the labour market remains resilient despite concerns around slowing growth. The data has helped GBP/USD maintain its position above the 20-day moving average, a level many traders view as an indication that short-term momentum remains constructive.

The stronger jobs numbers have also prompted renewed discussion about the Bank of England’s path for interest rates. If the labour market continues to hold up and inflation remains sticky, policymakers may find it difficult to become significantly more dovish.

That doesn’t mean sterling is about to rally unchecked, but it does mean the pound currently has a stronger domestic story than it has had for several weeks.