Dollar up, euro down
The dollar hit an 11-year high against major currencies on Friday as investors bet the monthly U.S. jobs report would increase the chances of rate hikes, even as the European Central Bank embarks on a €1 trillion bond-buying campaign.
The euro broke below $1.0980 for the first time since September 2003 as it continued its steady march lower.
The same balance of risks saw the gap between German and U.S. bond yields stretched to its widest in more than a quarter of a century as government bond yields across the 19-country euro zone took another step lower.
Equity investors were playing it safe, however, ahead of the U.S. jobs data.
Europe's benchmark FTSEurofirst 300 was inching higher again after Thursday's news that the ECB will start its long-awaited quantitative easing program at the beginning of next week had seen it hit a seven-year high.
Analysts polled by Reuters expect U.S. payrolls due later to have increased 240,000 last month and the jobless rate to have ticked down to 5.6% from 5.7%.
Although that would be a slight slowdown in the headline trend, it would mark the 12th straight month of job increases above 200,000, the longest such run since 1994.
Philip Marey, a U.S.-focused strategist at Rabobank, said the Fed is happy with the labor market in terms of interest rate hikes, but slack prices were a concern.
"It is the (low) inflation picture that will deter them from pulling the trigger on interest rates early," he said.
Against a basket of major currencies the dollar <.DXY> was at fresh 11-year highs as dealers readied for the payroll numbers, which could be delayed slightly from their usual 8:30 a.m. ET publication due to snow in Washington.
The recent run of U.S. economic news has been mixed at best, leading analysts to steadily downgrade forecasts for growth this quarter. A strongjobs report could offset that and give the Fed reason to stick to its tightening timetable at the next policy meeting on March 17-18.
In contrast, the picture in Europe has been steadily improving.
Data on Friday showed German industrial output rose more than expected in January, notching up its fifth straight monthly increase, while it also climbed 0.4% year-on-year in Spain.
"The positive result in January and the upward revision of the data from the previous months underline that the recovery of the German economy is continuing," its economy ministry said.