Image © Adobe Images

The number of Americans seeking out-of-work benefits rose last week, prompting a retreat in the Dollar and raising investor caution ahead of Friday's all-important non-farm payrolls release.

The Pound to Dollar exchange rate (GBP/USD) recovered half a percent to 1.1910 while stocks and oil prices rose amidst improved investor appetite.

Weekly jobless claims rose 211K, more than the consensus expectation of 195K and more than the previous week's 190K.

"Markets have reacted positively with stocks and oil benefitting the most," says Wael Makarem, Senior Market Strategist at MENA at Exness.

"The back-and-forth week continues, as signs of some weakness in US employment data prompted hopes that perhaps Powell’s hawkishness earlier in the week was misplaced," says Chris Beauchamp, chief market analyst at IG.

The Dollar surged on Tuesday after the Federal Reserve's Chair Jerome Powell said interest rates might need to rise by more than previously expected over the coming months as recent data have come in stronger than anticipated.

Markets raised expectations for a 50 basis point hike to a 70% certainty following the comments which raised domestic short-term bond yields and saw the Greenback bid.

But, the odds of such an outcome would decline if incoming data disappoint to the downside, which could offer some support to an under-pressure GBP/USD.

Markets are looking for a non-farm payroll headline reading of 205K on Friday (13:30 GMT), representing a halving on January's 517K.

Should the release come in below this level then the Dollar could face a further setback.

But a beat of the figure should prompt the currency to end the week with gains against its major peers.