Forex Today: Eurozone inflation data and US jobs report to ramp up volatility

Eren Sengezer FXStreet

Here is what you need to know on Friday, January 6:

Supported by the upbeat employment-related data from the US, the US Dollar outperformed its rivals on Thursday with the US Dollar Index rising to its highest level in three weeks above 105.00. Early Friday, markets stay relatively quiet as focus shifts to Eurozone inflation and Retail Sales figures ahead of the December jobs report from the US. US stock index futures trade modestly higher on the day following the heavy losses seen in Wall Street's main indexes on Thursday and the benchmark 10-year US Treasury bond yield holds steady slightly above 3.7%.

The monthly data published by ADP revealed on Thursday that private sector employment in the US rose by 235,000 in December, surpassing the market expectation of 150,000 by a wide margin. Further details of the report revealed that annual wage inflation was up 7.3% in the same period. Additionally, the US Department of Labor announced that there were 204,000 initial claims for unemployment benefits in the last week of 2022, down from 223,000 in the previous week.

Nonfarm Payrolls in the US are forecast to rise by 200,000 in December following November's better-than-expected increase of 263,000. Wage inflation, as measured by the Average Hourly Earnings, is expected to edge lower to 5% on a yearly basis from 5.1% in November. Ahead of the labor market data, the US Dollar Index consolidates its recent gains slightly above 105.00.

Nonfarm Payrolls Preview: Layoffs spreading or another blockbuster month? Three scenarios for the US Dollar.

EUR/USD fell sharply in the second half of the day on Thursday and came within a touching a distance of 1.0500 before going into a consolidation phase. The annual Harmonized Index of Consumer Prices (HICP) in the Eurozone are projected to declined to 9.7% in December from 10.1% in November.

EU Inflation Preview: Easing price pressures will lift hopes, but can it impact the Euro?

GBP/USD fell below 1.1900 for the first time since late November on Thursday but managed to stage a modest rebound. In the absence of high-impact data releases from the UK, the US Dollar's reaction to the US data should impact the pair's action heading into the weekend.

USD/JPY closed the third straight day in positive territory on Thursday and continued to stretch higher during the Asian trading hours on Friday. At the time of press, the pair was up 0.5% on the day at 134.10. The Bank of Japan (BoJ) conducted another unscheduled/emergency Japanese government bond (JGB) buying operation on Friday and announced that it held a two-year pooled collateral operation for the third straight session.

Following Thursday's sharp decline, AUD/USD clings to modest daily gains slightly above 0.6750 on Friday. China has reportedly placed its first order to import Australian coal, helping the Australian Dollar hold its ground for the time being.

Gold price snapped a two-day winning streak and lost more than 1% on Thursday pressured by the broad US Dollar strength and recovering US Treasury bond yields. XAU/USD edges higher toward $1,840 early Friday as the 10-year US T-bond yield stays quiet so far.

US December Nonfarm Payrolls Preview: Analyzing Gold price's reaction to NFP surprises.

Bitcoin failed to build on its weekly gains amid risk aversion and retreated below $16,700. Ethereum registered small losses on Thursday and was last seen trading flat at around $1,250.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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