The dollar rose against the euro and sterling.

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The dollar hit a two-year, eight-month high against the euro on Thursday after U.S. job market data gave investors confidence in the strength of the world’s largest economy.

The best performing G10 currency was the pound dollar It fell as much as 1.2 percent last year to $1.2371, its lowest level since late April, while the euro fell 0.9 percent to $1.0261, its lowest level since November 2022.

An index that tracks the dollar against a basket of six peers, incl Sterling And the euro, increased by 0.7 percent.

Thursday’s moves reflected investors’ confidence in how quickly the Federal Reserve will cut back on sluggish U.S. economic growth and continued inflation. Interest rates Strengthening demand for the dollar against other major currencies this year.

Data on Thursday showed that new applications for unemployment benefits fell to an eight-month low last week.

Markets expect the US central bank to cut rates by 0.43 percentage points by the end of 2025. Slower growth forecasts for the UK and the Eurozone, with the Bank of England and European Central Bank expected to cut rates by 0.59 percentage points and 1.08% respectively. Points are in order at the same time.

In equity markets, U.S. stocks gave up early gains to trade lower in New York at lunchtime, with the S&P 500 down 0.6 percent and the tech-heavy Nasdaq Composite down 0.7 percent.

Keith Jukes, currency strategist at Societe Generale, said sterling was “getting angry” on Thursday as investors adjusted their long positions in the currency.

“A big surprise at the end of last year was that dollar sales were very small when traders were usually covering their positions,” Jukis said.

“Sterling is a currency that many people own, which makes it a bit more vulnerable as the dollar continues to rally, especially in thin trading[conditions],” he added.

Other analysts said weak UK and Eurozone manufacturing data released on Thursday morning and concerns over higher natural gas prices could weigh on both sterling and the euro.

A five-year deal that stopped Russian gas flowing through Ukraine to EU countries expired early Wednesday, meaning European countries will be forced to import more expensive LNG from elsewhere.

The European Union has been emptying its gas storage facilities at a faster rate since the energy crisis three years ago, as cold winter weather increases demand, according to data from Gas Infrastructure Europe, an industry body.

Lee Hardman, currency strategist at MUFG Bank, said: “Higher gas prices would be negative for terms of trade for the UK and other euro economies, as they are big energy importers.”

David Oxley, chief climate and commodity economist at Capital Economics, said rising EU natural gas prices would continue to put pressure on the region’s industrial sector but not move the needle on inflation and interest rates.

Additional reporting by Harriet Clarfelt in New York