Asian shares staged a rebound on Thursday following the broadly positive cues from Wall Street overnight as plunging oil prices and weak US jobs data lifted market sentiment. European futures are pointing to a positive open amid the improving mood with investors directing their attention toward Friday’s US payrolls report which could support or hinder the market rally.

Looking at currencies, the yen is up roughly 0.3% this morning following the aggressive spike in value on Tuesday after touching 150 in USD/JPY. Given how it was the sole gainer versus the dollar, this fuelled speculation around official Japanese intervention. However, markets are still guessing what exactly triggered the move.

In the commodity space, oil prices plunged over 5% on Wednesday thanks to demand-side fears and a huge build in gasoline inventories. Gold is lingering near its lowest level since March, drawing some support from a weaker dollar and falling Treasury yields. Nevertheless, the precious metal remains vulnerable to further losses with sustained weakness below $1830 opening a path towards $1810.

US NFP in focus

The combination of economic data and speeches from Fed officials today could trigger more dollar volatility ahead of the highly anticipated non-farm payrolls report on Friday. Financial markets remain highly sensitive to US Treasury yields, and this continues to be reflected through the dollar rally.

The US economy is forecast to have created 170,000 jobs in September following August’s increase of 187,000 while the unemployment rate is seen cooling to 3.7% from 3.8% in the previous month.

A strong-than-expected US jobs report may support the “higher for longer” expectations around US interest rates, boosting the dollar as a result.  However, further evidence of a cooling labour market may support the argument that the Fed is finished with hiking rates this year, weakening the greenback. As of writing, traders are currently pricing in a 20% probability of a 25-basis point hike in November, with this jumping to around 40% by December, according to Fed Funds futures.

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