Forex Today: Dollar slides but still rules

Investors continue to closely monitor global bond markets as yields keep rising. During the Asian session, Australia will release trade data for August. Later in the day, the US will release the weekly Jobless Claims report, ahead of Friday's Nonfarm Payrolls report.

Here is what you need to know on Thursday, October 5:

The bond sell-off drove US and European yields to levels not seen in years before staging a recovery. The 30-year UK yield hit 5%, the German benchmark reached 3% for the first time since 2011, and the 10-year Treasury yield peaked at 4.88% before pulling back to 4.73%. Investors will continue to watch the bond market closely as it remains a key driver for financial markets.

According to Automatic Data Processing (ADP), private payrolls rose by 89,000 in September, below the market consensus of 153,000, marking the lowest level since January 2021. This data provides evidence of a softer labor market that will need confirmation, which could come from other reports. The ISM Services PMI declined from 54.5 to 53.6 in September, in line with expectations.

Nela Richardson, Chief Economist, ADP:

We are seeing a steepening decline in jobs this month. Additionally, we are seeing a steady decline in wages in the past 12 months.

The softer ADP report brought some relief to the sell-off in bonds. However, more US data is due on Thursday with Jobless Claims and on Friday with the Nonfarm Payrolls. Upbeat numbers could trigger more USD gains and increase volatility in the bond market.

USD/JPY remained steady around 149.00 after Tuesday's wild fluctuations. Japanese authorities likely intervened in the market when the pair rose above 150.00.

Boosted by a weaker US Dollar, EUR/USD rose to 1.0525 and posted daily gains. Eurozone Retail Sales dropped more than expected in August, falling by 1.2%, while the Producer Price Index (PPI) declined by 0.6%, matching market consensus. German trade data is due on Thursday. With markets firmly expecting no rate hike from the European Central Bank (ECB) comments from central bankers have become less relevant.

GBP/USD surged, having its best day in over a month, rising from six-month lows at 1.2030 to around 1.2150. The trend is still down, but the rebound offers some relief.

AUD/USD rose, helped by a rebound in commodity prices, holding above 0.6300. The pair needs to recover levels above 0.6360 to alleviate bearish pressure. Australia will report trade data on Thursday. 

As expected, the Reserve Bank of New Zealand (RBNZ) kept the rate steady at 5.5%. The next meeting on November 29 will include updated macro forecasts and a press conference, and there could be a rate hike according to market expectations. NZD/USD fell to test September lows at 0.5870 and rebounded, ending the day positively around 0.5930.

The Canadian Dollar was the worst performer among majors, affected by the sharp slide in crude oil prices. USD/CAD jumped to 1.3784, reaching the highest level since March.

Gold traded sideways around $1,820 but remains under pressure. Silver lost some ground but remained within the recent range around $21.00, consolidating recent losses.