The dollar struggled to rally on Friday after falling at its sharpest pace in two weeks as investors remained in the dark ahead of widely expected US jobs data and amid growing fears of a recession.

The U.S. dollar index, which measures the greenback against a basket of currencies, fell 0.68% overnight, its biggest drop since July 19, and last traded at 105.79.

Investors await the main US non-farm payrolls report, due at 12:30 GMT, which will give hints on how the US economy is faring.

Economists expected jobs to rise by 250,000 in July after adding 372,000 in June.

“Obviously wages are on everyone’s mind today, so I think that’s keeping things relatively subdued,” said Ray Attrill, head of currency strategy at National Australia Bank.

Still, there may already be signs of a softening in the labor market, as overnight data showed that the number of Americans filing new claims for unemployment benefits rose last week.

Against a weaker dollar, the euro rose 0.8% overnight and last traded at $1.0238, although the reprieve is likely to be short-lived as concerns over the energy crisis remain.

The standoff over the return of a turbine that Russia says is holding back gas supplies to Europe showed no signs of resolution on Thursday, as Moscow said it needed documentation to prove the equipment was not subject to sanctions.

“We still expect EUR/USD to trade below parity, more than briefly, over the next few weeks,” said Joseph Kapurso, head of international economics at the Commonwealth Bank of Australia.

Sterling, meanwhile, held steady around $1.2157 in early Asian trade on Friday, recouping most of its losses after a dour signal from the Bank of England.

The pound fell about 0.3% for the week, reversing the gains made in the previous two weeks.

On Thursday, the Bank of England raised the key rate by half a percentage point to 1.75%, the highest rate since late 2008, but warned of a long recession in Britain.

“Apart from a knee-jerk reaction to the Bank of England’s very pessimistic view of the economy – which I think was what initially caused the pound to fall – there has been no effective execution and I don’t think anyone wants to take that view that whether that bounce is appropriate or not until (we) see how the US dollar behaves tonight,” NAB’s Atril said.

Elsewhere, the dollar fell 0.69% against the yen overnight and is on track for a third straight weekly loss.

It last traded at 132.9 yen per dollar.

Similarly, the risk-sensitive Aussie and Kiwi were at $0.6956 and $0.6290, respectively, after rising about 0.2% and 0.3% overnight.

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