The U.S. dollar weakened slightly on Thursday ahead of the release of more important labor market data, while the euro gained a bit despite political turmoil in France.

At 5:20 AM ET (10:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 106.180.

The dollar has given back some of its recent gains after private monthly payrolls grew more slowly than expected while service sector activity slowed in November after posting gains in recent months.

Federal Reserve Chairman Jerome Powell has indicated that the U.S. economy is now stronger than the central bank expected in September when it began lowering interest rates, suggesting a slower pace of rate cuts ahead.

Markets are still expecting a rate cut in December, but weekly initial claims data later in the session and, more importantly, Friday's nonfarm payrolls could help guide expectations for future rate moves.

"Weekly initial jobless claims have remained very low of late, but tomorrow's NFP jobs data will have a much bigger influence on the dollar's direction going forward," analysts at ING said in a note.

Euro gains despite French political crisis

In Europe, EUR/USD rose 0.2% to 1.0532, pulling away from a two-year low of 1.0331 hit in late November despite French Prime Minister Michel Barnier's resignation after losing a no-confidence vote on Wednesday.

This could lead to a delay in fiscal control in the euro zone's second-largest economy, but the country's large budget deficit will have to be addressed at some point.(ayu)

Source: Investing.com