The euro slipped below $1.12 early Friday as a global selloff in AI stocks revived safe-haven demand for the dollar. That bid has come even as markets pared back expectations for a December Fed hike following the US midterms. On the euro side, headline inflation rose to 4.0% in October while core inflation held at 2.5%, and ECB President Christine Lagarde’s emphasis on persistent inflation risks has helped cushion the downside. Lingering tariff uncertainty and a pullback in eurozone yields have tempered that support. German industrial production and eurozone retail sales are the next tests for the region’s growth outlook, though US payrolls are likely to have the bigger influence on EURUSD through their impact on Fed expectations.

Sterling has steadied against the dollar ahead of U.S. payrolls, with the Bank of England’s rate hike and its signal that another increase may be needed continuing to underpin the pound. The UK’s autumn budget has also helped ease near-term fiscal concerns. On the dollar side, hopes for diplomacy with Iran have pushed oil prices lower, easing inflation concerns and helping pull Treasury yields down, while the prospect of gridlock after the U.S. midterms has tempered expectations for fresh fiscal stimulus. A softer payrolls print could reinforce the decline in yields and support sterling, while a stronger report could lift the dollar by firming expectations for a December Fed hike.

The yen has slipped from a weekly high against the dollar as traders adjust positions ahead of Friday’s US payrolls report. The dollar’s rebound has been modest, with hopes for diplomacy with Iran driving oil prices lower, easing inflation concerns and prompting markets to trim bets on a December Fed hike. A selloff on Wall Street also pushed Treasury yields lower, narrowing the US yield advantage. Meanwhile, the Bank of Japan’s latest minutes reinforced expectations of a December hike, giving the yen some support. A strong payrolls print could revive Fed hike bets and lift USDJPY, while a softer reading could push US yields lower and put the yen back on the front foot.

The Australian dollar remains under pressure as markets pare back expectations for further RBA tightening. The central bank raised rates this week, but a split vote and softer guidance opened the door to a December pause, even as Deputy Governor Andrew Hauser stressed that inflation remains elevated. A firmer US dollar has added to the pressure on AUDUSD as investors turn cautious ahead of US payrolls, though lower Treasury yields and hopes for diplomatic progress with Iran have tempered the greenback’s rebound.