The U.S. dollar drifted lower Thursday, on track for a roughly 1% weekly loss even after a robust January payrolls report. The Dollar Index fell 0.1% to 96.700, reflecting persistent selling pressure that overwhelmed the positive economic data. Market reaction to the strong jobs numbers proved fleeting, with the initial rally quickly reversing.

Analysts at ING noted the data offered "good and bad news" for the greenback. While job growth accelerated and unemployment fell to 4.3%, the failure of the dollar to sustain its rally signals markets remain focused on longer-term considerations. Traders are still pricing in future rate cuts, and the bar for a sustained dollar recovery is now higher, requiring more consistently strong data.

The pound edged up to 1.3653 despite U.K. GDP growth stalling at 0.1% for a second quarter. The euro gained to 1.1886, buoyed primarily by dollar selling. The yen strengthened to 152.93 against the dollar, hitting a three-week low amid speculation over Japanese government intervention. The Australian dollar rose after RBA Governor Michele Bullock warned of further hikes if inflation re-entrench.

With the dollar failing to capitalize on clear signs of U.S. economic resilience, focus shifts squarely to Friday's consumer price index report. The payrolls data alone was insufficient to alter the prevailing negative sentiment, leaving the currency's direction dependent on the next major inflation print.