The dollar remained near its lowest level in three and a half years this week on Thursday morning ahead of the much-anticipated US jobs report, while a trade deal between the United States and Vietnam boosted expectations for similar agreements before the US tariffs take effect on July 9.

Sterling rose slightly after falling nearly 1% on Wednesday, following a statement from the UK Prime Ministers office affirming Keir Starmers support for Finance Minister Rachel Reeves amid rumors of her potential dismissal over investor concerns about the UKs financial situation.

UK government bond prices stabilized after a sharp sell-off on Wednesday, triggered by Reeves emotional appearance in Parliament and the governments retreat on social care reforms due to party pressure.

The pound rose 0.2% to $1.3665, while the euro remained nearly unchanged at $1.180, close to its highest level since September 2021 recorded earlier this week. The Japanese yen edged down slightly to 143.80 yen against the dollar.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said markets are worried about Reeves being replaced by someone less committed to fiscal rules and more willing to increase borrowing.

She added, The pound may remain under downward pressure unless the UK government takes steps to restore market confidence in its public finances.

The US Dollar Index, which measures the currency against a basket of six major currencies, held steady at 96.748, close to its lowest levels in over three and a half years, and is on track for a weekly loss of 0.5%.

The US Jobs Report

Attention turns to the US Department of Labors comprehensive June jobs report expected later today, forecasted to show the unemployment rate rising to 4.3%, the highest in over three and a half years, according to a Reuters poll.

A special report released Wednesday painted a bleak picture of the labor market, prompting traders to adjust expectations on the timing of Fed rate cuts. LSEG data showed markets are now pricing a 25% chance of a July rate cut, up from 19% the day before.

Max McKinney, global markets strategist at JPMorgan Asset Management, said, Todays data will again highlight growth concerns and likely increase pressure on the Fed to speed up rate cuts.

He added, With inflation remaining well above target more than unemployment, the Fed should hold its stance. One weak labor report alone shouldnt be enough to change policy.

Pending Trade Deals

Ahead of the July 9 tariff deadline, US President Donald Trump announced a trade agreement with Vietnam and suggested similar deals could be reached with other countries.

Despite limited details, Trump said Vietnamese exports will face a 20% tariff, while a 40% tariff will apply to goods transiting through Vietnam from third countries, aiming to prevent trade circumvention.

The Vietnamese dong hit an all-time low, with UBS analysts expecting the central bank to allow a gradual currency depreciation to ease the tariff impact on exporters.

Meanwhile, talks with other countries proceed slowly. Japan expressed reservations over certain terms citing national interest, while South Korean President Lee Jae-myung said negotiations with the US are not going smoothly and he cannot confirm if a deal will be reached before the July 9 deadline.

Meanwhile, US House Republicans voted in favor of a procedural step allowing discussion of Trumps massive tax and spending bill, paving the way for a final vote. The bill is expected to add $3.3 trillion to the rising national debt, raising global bond market concerns about government deficits, not only in the US but also in major economies like Japan.