The US dollar held steady on Wednesday ahead of this weeks US inflation data, which may help shape expectations for Federal Reserve policy, while geopolitical tensions boosted safe-haven currencies such as the Swiss franc.

Employment data released last week showed the US economy created far fewer jobs over the past year than expected, making a Fed rate cut next week appear almost certain.

However, this weakness has not been reflected in stock market confidence, as indexes continue trading at record highs, and it has not had a direct impact on the dollar, even as investors assess the possibility of a half-point cut next week.

Investor concerns have intensified with recent geopolitical developments, as Israel launched an airstrike on Qatar targeting Hamas leaders on Tuesday, while Poland shot down drones that entered its airspace during a Russian attack on western Ukraine on Wednesday.

Jane Foley, Head of FX Strategy at RaboBank, said: The market has made up its mind, rightly so, that the Fed will cut rates. But much of this easing has already been priced in through the end of next year. She added: On the other hand, geopolitical uncertainty, such as the news from Poland and Qatar, is not reassuring.

The euro was steady against the dollar but jumped 0.5% against the Polish zloty to 4.268, its largest daily gain in three months.

As for Fed expectations, traders are currently fully pricing in a quarter-point cut next week, with only a small chance of a half-point cut. Analysts noted that wholesale inflation data due Wednesday and consumer inflation data on Thursday could influence the likelihood of a larger move.

Kieran Williams, Head of Asia FX Trading at InTouch Capital Markets, said: The bar for a 50-basis-point cut is high. It would require a clear downside shock in core inflation for the doves to have cover. He added: Given the stickiness of services prices and the Feds preference for gradualism, a large cut next week looks unlikely, but the data will determine how aggressively the market prices the easing path through year-end.

In another development, uncertainty increased with the resignations of the prime ministers of France and Japan this week, raising questions about the economic and political outlook in two of the worlds seven largest economies.

The euro was little changed at $1.1702 after falling 0.5% in the previous session, while the yen was steady at 147.49 per dollar, and the Swiss franc remained near a seven-week high, with the dollar trading at 0.798 francs.

The dollar index, which measures the US currency against six major counterparts, was flat. However, it has fallen 10% since the start of the year, pressured by turmoil in US trade and fiscal policy and growing concerns over central bank independence.

Markets showed little reaction to a court ruling that temporarily blocked President Donald Trumps attempt to dismiss Fed Governor Lisa Cook, a case expected to end up at the US Supreme Court.

Data released Tuesday showed the US economy created 911,000 fewer jobs than previously estimated in the period through March, indicating that the slowdown in job growth had already begun before Trumps imposition of strict tariffs on imports. However, this data did not provide a clear picture of job creation after March, leaving Fed rate cut expectations unchanged for now.

Matt Simpson, Senior Market Analyst at City Index in Brisbane, said: I think a 50-basis-point cut could do more harm than good at this stage. He added: Moreover, the Fed will want to preserve its image and not appear to be bowing completely to Trumps wishes.

He continued: Markets are already pricing in three cuts over the next three meetings, and the Fed is well positioned to align with these expectations or even boost the odds of further cuts in 2026 without resorting to a 50-basis-point move next week.