US Dollar Holds Strong Amid Mixed Jobs Data and Escalating Global Trade Tensions
The US Dollar Index (DXY) remains in focus as global markets react to key economic indicators, including the latest US Nonfarm Payrolls (NFP) report. With shifting investor sentiment and economic uncertainties, currency pairs such as EUR/USD, GBP/USD, and USD/JPY are experiencing notable movements. Meanwhile, gold continues to attract safe-haven demand, and crude oil prices fluctuate amid geopolitical and trade concerns. This market update provides insights into key developments shaping financial markets.
US Dollar Index (DXY)
The US Dollar Index (DXY), which measures the strength of the US Dollar against six major currencies, stands at 107.73 in the aftermath of the US Nonfarm Payrolls (NFP) report. The old market adage “buy the rumor, sell the fact” holds true once again. With market expectations excessively high and a weaker-than-expected print, the DXY has managed to avoid dropping below 107.35, despite initial knee-jerk reactions.
The actual Nonfarm Payrolls data for January came in at 143,000, falling short of the 170,000 consensus and down from December’s 256,000. The range of estimates was from 105,000 to 240,000, so while the 143,000 print was on the lower end, it still falls within expectations. As a result, the market’s response was somewhat muted, and the DXY held steady above 107.35.
Daily Market Digest: Expectations Shattered
EUR/USD
The EUR/USD pair has drifted lower to around 1.0310 during the Asian session on Monday, weighed down by the stronger US Dollar. Attention will turn to the Eurozone's Sentix Investor Confidence for February and a speech from ECB President Christine Lagarde later today.
President Trump’s tariff threats have raised concerns of a global trade war, supporting demand for the safe-haven US Dollar. "The immediate concern might not be inflation, as there could be counter effects such as demand slowdown. The bigger concern is the uncertainty and the shift towards a more protectionist world," noted Charu Chanana, chief investment strategist at Saxo.
Speculation about further rate cuts from the European Central Bank (ECB) amidst weak economic growth could weigh on the Euro (EUR) against the USD. ECB Governing Council member Boris Vujcic suggested that expectations of three more rate cuts this year are reasonable, though clarity won't come until the second quarter.
Traders will closely monitor developments surrounding Trump’s tariff policies, with threats aimed at Europe, and the European Commission has warned of firm retaliation against any US-imposed tariffs.?
GBP/USD
The GBP/USD pair has rebounded slightly from the Asian session low, currently trading near 1.2400. However, the upside remains capped due to moderate US Dollar strength. Trump’s tariff threats boost demand for the US Dollar, while the positive US employment data strengthens the case for the Federal Reserve (Fed) holding rates steady, further supporting the USD. The Bank of England’s (BoE) pessimistic outlook also limits upside potential for GBP/USD.
From a technical standpoint, recent rejections near the 50-day Simple Moving Average (SMA) suggest a bearish bias for GBP/USD. Any rallies are expected to be capped near the 1.2500 level, with 1.2375-1.2370 serving as immediate support. A break below that could see the pair testing the 1.2300 level, with further declines likely towards the 1.2175 region.
USD/JPY
The USD/JPY pair climbed 0.48% to 152.10 on Friday, supported by the US Dollar’s strength and cautious commentary from Federal Reserve officials. With US labor market data remaining solid, the market expects the NFP report to show 175,000 job gains for January, though there is a possibility of a stronger figure.
The Fed’s cautious stance on rate cuts remains intact, as officials like Dallas Fed’s Logan emphasized that even a drop in inflation wouldn’t necessarily lead to near-term easing. Policymakers are also concerned about fiscal uncertainties that may delay rate cuts. However, the Fed’s sentiment index remains hawkish, supporting the US Dollar.
AUD/USD
The AUD/USD pair faces selling pressure, trading near 0.6245 during the early Asian session. Trump’s tariff threats, which include imposing tariffs on steel and aluminum imports from all countries, including Australia, add to the pressure on the Australian Dollar (AUD). Additionally, with the Federal Reserve expected to keep rates on hold this year, the US Dollar is supported, creating headwinds for AUD/USD.
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US Nonfarm Payrolls data showed that 143,000 jobs were added in January, below expectations. The Unemployment Rate decreased to 4.0%, while annual wage inflation climbed by 4.1%, surpassing expectations. This strengthens the case for a US Dollar rally, adding pressure on AUD/USD.
Gold (XAU/USD)
Gold (XAU/USD) continues its rally, reaching around $2,865 in the early Asian session, as escalating trade tensions prompt investors to flock to the precious metal as a safe-haven asset. Trump’s tariff announcements and concerns over a potential global trade war further support gold.
In addition, the People’s Bank of China (PBOC) added gold to its reserves for the third consecutive month in January, which further supports the yellow metal. “The PBOC is likely to continue diversifying its reserves in the long term, given rising geopolitical uncertainty,” said Bloomberg Economics’ David Qu.
However, strong labor market data in the US could limit the scope for gold’s price rally, as expectations that the Federal Reserve may hold rates steady could support the US Dollar and weigh on gold.
West Texas Intermediate (WTI)
West Texas Intermediate (WTI) Crude Oil prices gained slightly for the second consecutive day on Monday, moving away from the lowest level since December 30. WTI is currently trading around $71.25, up over 0.60% for the day, but it lacks bullish momentum due to mixed signals from the market.
While US sanctions targeting individuals and vessels involved in the Iranian crude trade support oil prices, concerns about the impact of Trump’s tariff policies and global economic growth weigh on oil sentiment. Trump's 25% tariffs on steel and aluminum, along with the growing US-China trade war, dampen bullish outlooks for crude.
As market participants assess the impact of economic data, central bank policies, and geopolitical events, volatility remains a key theme across currency, commodity, and equity markets. The resilience of the US Dollar, ongoing trade tensions, and expectations around interest rates will continue to influence investor sentiment. Traders will keep a close watch on upcoming economic reports and central bank statements for further direction.
The weekly market update is published every Monday. If missed due to unforeseen circumstances, it will be posted the following day.
This is for informational purposes only and should not be interpreted as specific investment advice.
While the information is believed to be accurate, it is not guaranteed and is subject to change without notice.
Past performance does not guarantee future results.
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Special risks are inherent to currency fluctuations, foreign political and economic events
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