Forex Today: US January jobs report to wrap up volatile week

Eren Sengezer FXStreet

Here is what you need to know on Friday, February 3:

Following the highly volatile action witnessed on Wednesday and Thursday, markets seem to have turned cautious on the last trading day of the week. As investors await the January jobs report from the US, the US Dollar Index consolidates Thursday's recovery gains slightly below and US stock index futures trade in negative territory. December Producer Price Index data will be featured in the European economic docket and S&P Global will release the final revisions to January Manufacturing and Services PMIs for Germany, the Eurozone, the UK and the US. Finally, the ISM will publish the US Services PMI ahead of the weekend.

US Nonfarm Payrolls Forecast: Analyzing January NFP release.

The European Central Bank (ECB) decided to raise key rates by 50 basis points (bps) as expected and said that it intends to opt for one more 50 bps hike in March before reassessing the situation. During the press conference, ECB President Christine Lagarde refrained from committing to additional rate increases after March and noted that inflation risks are now more balanced. Lagarde's dovish tone caused EUR/USD to lose its traction and the pair erased a large portion of Wednesday's gains before stabilizing at around 1.0900 on Friday.

ECB Analysis: Lagarde lowers Euro with mixed message on moves beyond March, two more dovish comments.

Meanwhile, the Bank of England (BoE) announced that it hiked the policy rate by 50 bps to 4% with 7 members of the MPC voting in favor of the decision. The BOE's policy statement revealed that the bank lowered inflation forecasts and saw a shallow recession. Additionally, BoE Governor Andrew Bailey noted that they will re-evaluate the policy if the economy evolves in line with their central forecasts. The Pound Sterling came under strong selling pressure following the BOE event and GBP/USD dropped to its lowest level since mid-January at 1.2220. Early Friday, the pair continues to edge lower and trades below 1.2200, pressured by risk aversion.

Bank of England Quick Analysis: Three dovish things that are set to keep Sterling down for longer.

Although US Treasury bond yields continued to stretch lower on Thursday, the renewed US Dollar strength forced XAU/USD to turn south. Gold price retraced its weekly advance and was last seen trading in a tight channel slightly above $1,910.

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

USD/JPY managed to stage a rebound from multi-week lows on Thursday but failed to gather recovery momentum. Early Friday, the pair is moving up and down slightly above 128.50. Bank of Japan (BoJ) Governor Haruhiko Kuroda told the Japanese parliament on Friday that the BoJ must maintain the ultra-easy policy to support the economy and create an environment for firms to hike wages.

Bitcoin touched its highest level since mid-August above $24,000 on Thursday but ended up posting modest daily losses. BTC/USD was last seen trading flat on the day at around $23,500. Ethereum reversed its direction after rising above $1,700 on Thursday and declined below $1,650 early Friday.

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.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.