Dollar little changed as oil prices bounce, payrolls eyed

The dollar index remained largely unchanged on Thursday, as oil prices rebounded following a sharp decline the previous day, and investors considered the prospect of reduced AI-related spending potentially slowing economic growth. Crude prices rose more than 3% after plummeting on Wednesday due to the Republican Party's election losses, which increased expectations of a reduced risk of a further escalation in the US-Israeli war on Iran.

Simultaneously, US stocks experienced significant losses, with the S&P 500 technology sector dropping over 6% as concerns about massive AI-related company spending and potential new regulations resurfaced. Democrats aimed to capitalize on their midterm victory to curb President Donald Trump, setting the stage for possible discord in Washington.

Investors awaited Friday's key government payrolls report, with Labor Department data showing weekly initial jobless claims falling by 6,000 to 189,000, matching a 57-year low in July and below the 196,000 estimate of economists surveyed by Reuters. US worker productivity increased faster than anticipated in the third quarter, putting downward pressure on labor costs and supporting the view that the labor market was not a source of inflation.

While oil rebounding and positive economic data supported the stable US job market and Fed interest rate hikes, the market anticipated a slower longer-term growth outlook due to potential slowdowns in AI buildout. The Fed was still expected to maintain rate hikes in December and early 2024, as reflected in the markets' positioning ahead of the payrolls report.