The dollar is rising and heading towards recording its largest weekly gains in two years.

The movements of the US dollar stabilized during the early trading on Friday, quickly recording a strong jump following the release of the US labor market data for September.

In this regard, the official data showed a decrease in the unemployment rate from 4.2% to 4.1% during September, and revealed an increase in the number of jobs added by the US economy by 254,000 jobs, while expectations had predicted a growth of only 140,000 new jobs.

Additionally, the previous reading of the non-farm payrolls was revised to show an increase of 159,000 new jobs for August instead of 142,000 jobs.

The developments in the labor market have been a priority for the US Federal Reserve, especially after two months of significant weakness, which stirred doubts about the state of economic activity in the United States, fuelling concern in the markets during the previous trading sessions.

Moreover, it seems that the US Federal Reserve hastened to start its interest rate cut cycle at the September meeting to avoid causing unnecessary damage to the US economy, which led to a decrease in the dollar during that time.

Federal statements in recent times have emphasized the need to monitor labor market developments and their impact on future monetary policy; however, these data have reinforced investor confidence in the US economy, increasing the likelihood that the Federal Reserve will not rush to cut interest rates significantly or at a faster pace, which boosted the dollar's rise.

In this context, the CME Group’s Fed Watch Tool indicates that markets see a 92.5% chance that the US Federal Reserve will cut interest rates by 25 basis points at the upcoming November meeting, providing clear support for dollar trading today.

Daily and Weekly Performance of the US Dollar Movements

Looking at the currency market trading today, it can be observed that the dollar index – which measures the dollar’s performance against a basket of other currencies – rose by about 0.48% to reach 102.43 points.

On the weekly front, the dollar is heading towards achieving its largest weekly gains since September 2022, continuing its streak of daily gains for the fifth consecutive session, with total dollar gains since the beginning of trading this week until now amounting to about 2.03%.