Dollar poised for best month in nearly a year; eyes on jobs data, Gulf tension

The dollar slipped on Monday, giving back some of its recent gains. It remained on track for its largest monthly advance in nearly a year.

The greenback has been buoyed by safe-haven demand as fighting in the Middle East escalated. The Gulf conflict has kept energy prices elevated and clouded the global economic outlook. Traders are now looking ahead to Friday's nonfarm payrolls report, the next major test for the currency's rally.

The jobs data will feed into the Federal Reserve's rate calculus. The central bank has held its benchmark at 5.25%-5.50% since July and has signaled it needs more evidence that inflation is sustainably easing before cutting. A strong hiring print would reinforce that stance, maintaining the dollar's yield advantage over rivals. A weak number would revive speculation that the first cut could come in September, pulling the dollar lower.

Oil prices added to the dollar's rise this month as tensions in the Gulf threatened supply. The dollar index had gained about 1.5% through Friday, putting it on course for its biggest monthly rise since June 2024. Monday's dip looked like position-squaring ahead of the payrolls report, traders said.

Sterling was the best performer among major currencies Monday, rising 0.3% to $1.2560. The euro edged up to $1.0820. Both moves were modest, with volume thin as the calendar wound down.

Friday's payrolls report, due at 8:30 a.m. ET, will be the next scheduled data that can shift the rate outlook.