Market sentiment stays slightly positive early Thursday. This follows Wednesday’s surprisingly strong U.S. employment data and ongoing U.S.-Iran tensions, along with fresh challenges to U.S. President Donald Trump’s trade tariffs, which had earlier weighed on risk appetite. The current cautious optimism reflects doubts about reduced Federal Reserve (Fed) rate cut expectations despite strong jobs data, mainly due to policymakers’ concerns about U.S. inflation. Traders also remain careful ahead of key data from the United Kingdom (UK), U.S. Jobless Claims, and Friday’s U.S. Consumer Price Index (CPI).
On Wednesday, the strong NFP data initially triggered heavy U.S. Dollar (USD) buying. The euro dropped to 1.1835 from 1.1900, while USDJPY rose by one cent. Later, doubts about whether employment is truly accelerating, after five weaker labour readings in recent months, reduced USD gains.
The January non-farm payrolls (NFP) report showed +130K jobs versus +70K expected. However, revisions revealed the economy added 181,000 jobs in 2025 instead of the previously reported 584,000, reducing confidence in labour market strength. The unemployment rate fell to 4.3% versus 4.4% expected and 4.4% prior. Average hourly earnings rose 0.4% month-on-month (m/m) versus 0.3% expected and increased 3.7% year-on-year (y/y) versus 3.6% expected.
Federal Reserve officials maintained a cautious tone. Fed’s Schmid said further rate cuts could allow higher inflation to last longer. Fed’s Hammack stated that rates are near neutral, supported holding policy steady, warned about U.S. debt risks, and said unemployment is stabilising, but inflation remains too high. As a result, the probability of a June rate cut dropped to 72% from 100% before the report.
Geopolitical tensions remain important. After talks with Israeli Prime Minister Benjamin Netanyahu, President Donald Trump said no final agreement had been reached with Iran, though negotiations would continue, and he prefers a deal. Meanwhile, the Pentagon asked a second aircraft carrier strike group to prepare for possible deployment to the Middle East as pressure on Iran increases during fragile nuclear talks. No final order has been signed, but it could come quickly if negotiations with Tehran fail.
In trade developments, the U.S. House of Representatives passed a resolution 219–211 to end Trump’s tariffs on Canada. The measure, introduced by Representative Gregory Meeks, aims to cancel the national emergency declaration that provides the legal basis for the tariffs. The resolution must still pass the Senate and overcome a likely presidential veto. Separately, the Canadian Dollar (CAD), also called the Loonie, was volatile after reports that Trump had considered leaving the United States-Mexico-Canada Agreement (USMCA).
The South China Morning Post (SCMP) reported that Trump and Chinese President Xi Jinping may extend the trade truce at an April Beijing summit. A longer truce would support risk sentiment, limit worst-case tariff fears, and help cyclical stocks and Asia foreign exchange (FX). Markets are watching soybeans and agriculture, semiconductors and export control rhetoric, the Chinese Yuan offshore (CNH), and the Australian Dollar (AUD) as China-growth indicators.
In Japan, January wholesale inflation slowed. The Producer Price Index (PPI) and Corporate Goods Price Index (CGPI) rose 2.3% y/y, matching expectations. Slower CGPI may reduce immediate pressure for tightening, but rising import prices strengthen the link between yen weakness and inflation. USDJPY remains sensitive as markets assess whether currency weakness will keep the Bank of Japan (BOJ) leaning hawkish.
Japan’s Vice Finance Minister for International Affairs, Atsushi Mimura, known as the country’s top currency diplomat, said authorities remain highly alert to foreign exchange volatility and have not lowered their guard.
In the UK, the Royal Institution of Chartered Surveyors (RICS) January house price balance improved to -10, beating forecasts.
In Australia, Reserve Bank of Australia (RBA) Governor Michele Bullock said a higher AUD and higher rates will help cool demand. She explained that the February tightening aimed to reassert inflation control while keeping policy flexible and data-driven. The RBA remains open to further rate hikes if needed, keeping AUD and short-term yields sensitive to inflation data.
Bank of Canada meeting minutes showed policymakers agreed on maintaining flexibility in setting interest rates.
Oil prices fell after Trump repeated his preference for a deal with Iran. The Energy Information Administration (EIA) reported weekly crude oil inventories rose by 8,530K versus 793K expected.
Amid these plays, the U.S. Dollar Index (DXY) fades the previous day’s corrective bounce, but gold and major currencies, ex-JPY, remain under pressure. Meanwhile, AUDUSD and crude oil retreat, NZDUSD dribbles, and the USDCAD also holds lower grounds, whereas cryptocurrencies keep the previous weakness. That said, the Asia-Pacific equities drifted lower after the Wall Street benchmarks closed with modest losses.
The U.S. Dollar’s failure to hold its post–non-farm payrolls (NFP) gains does not support EUR/USD buyers. As a result, EUR/USD falls for the third straight day and reduces its weekly gains. This weakness is linked to mixed comments from European Central Bank (ECB) officials and rising geopolitical concerns in the Eurozone.
USDJPY is under pressure due to fears of possible Japanese intervention and hawkish expectations from the Bank of Japan (BoJ). The pair falls to a two-week low and declines for the fourth consecutive day, despite optimism over the Japanese Prime Minister’s snap election victory and an almost confirmed stimulus package.
Recent UK Retail Sales and House Price data have been positive. However, the Bank of England’s (BoE) cautious tone and political uncertainty in the UK are pushing GBPUSD lower for the third straight day.
The pair also appears to be positioning ahead of the upcoming monthly data releases and the preliminary reading of the UK’s fourth-quarter Gross Domestic Product (Q4 GDP). Forecasts are mostly optimistic, so GBPUSD, also known as Cable, could recover slightly if the U.S. Dollar (USD) continues to weaken and the UK data comes in strong.
Major currencies are not gaining much from the U.S. Dollar’s (USD) weakness. Meanwhile, commodity-linked currencies such as the Australian Dollar (AUD), New Zealand Dollar (NZD), and Canadian Dollar (CAD) trade mixed against the greenback, as markets react to uncertain China-related news and shifting risk headlines.
AUDUSD pulls back from a three-year high. NZDUSD shows no clear direction. USDCAD extends the previous day’s rebound from a two-week low, supported by softer crude oil prices and ongoing mixed concerns about Canada’s trade relationship with the U.S.
Like major currencies, gold, silver, and crude oil are also not benefiting from the softer U.S. Dollar (USD). Instead, they post modest losses as markets stay cautious ahead of key U.S. data and react to mixed risk-related news.
Crude oil faces extra downside pressure due to unexpectedly strong U.S. crude oil inventory data and ongoing talks with Iran.
Bitcoin (BTC) and Ethereum (ETH) remain under pressure. Although they posted small gains early Thursday due to the softer U.S. Dollar (USD), overall sentiment stays weak. This reflects market discomfort over U.S. cryptocurrency policies, a technical breakdown in charts, and rising geopolitical tensions.
In equities, Wall Street benchmarks closed with modest losses, and Asia-Pacific shares also moved lower. Stock futures initially jumped after the non-farm payrolls (NFP) release despite rising bond yields, but the gains faded as software stocks were hit again. There is a clear move away from U.S. technology stocks, which may be limiting further USD strength. Meanwhile, traditional “old economy” stocks outperformed, with Caterpillar up 4% and energy stocks broadly higher. Still, there are concerns that this stock market rebound may be temporary.
UK Gross Domestic Product (GDP), the monthly data releases, and U.S. Jobless Claims will shape Thursday’s economic calendar. However, the main focus will remain on the fresh challenge to President Donald Trump’s tariffs, ongoing Iran talks, and Friday’s U.S. inflation data.
As markets struggle to hold U.S. Dollar (USD) gains despite strong U.S. employment figures, doubts about the Federal Reserve (Fed) and mixed risk sentiment could bring back greenback sellers if upcoming data is weak.
If USD weakness continues, gold and silver may rebound. GBP/USD could rise, but will likely need support from strong UK data. Equities, gold, and crude oil may post modest gains, while cryptocurrencies could remain under pressure.
May the trading luck be with you!
