The EUR/USD currency pair traded in a relatively flat band between 1.1600 and 1.1630 during Friday's session. Foreign exchange volatility remained quite subdued as market participants kept a close watch on the upcoming US Nonfarm Payrolls release. Meanwhile, in the Eurozone, German factory orders surpassed expectations while traders awaited retail sales data scheduled later in the day.
German Industrial Orders Show Strong Expansion
Data released from Germany on Friday revealed that factory orders advanced by 2.5% in July, outperforming consensus forecasts of a 0.3% increase and following a 3.7% gain in June. On a year-over-year basis, orders for German industrial goods surged by 13.1%, representing nearly double the 7.2% increment recorded in the previous month.
Analyst Perspectives on Inflation and Fed Policy
Analysts at TD Securities note that inflation remains the crucial piece of the puzzle, since a portion of the strength in the Nonfarm Payrolls can be viewed as a reversal from July weakness. In that context, a robust employment report will provide a slight boost to the US Dollar but is unlikely to prompt the committee toward a rate hike unless followed by an equally strong inflation print. Experts added in a note that in the event of an upward payrolls surprise of 40k to 50k above consensus median, historical sensitivity points to a 0.2% knee-jerk reaction for the USD on the day.
Performance Across Major Currencies and Assets
During the Asian session, the USD/JPY pair retested its monthly swing lows as a more hawkish repricing of Bank of Japan rate expectations and suspected intervention continued to support the Japanese Yen. Simultaneously, the US Dollar consolidated prior losses amid soft US bond yields, further pressuring the currency pair ahead of the employment data. The AUD/USD pair held steady above the 0.7200 mark near mid-May highs as bulls awaited further policy clues from the Federal Reserve before establishing new positions.
Gold remained defensive below the $4,500 threshold during the Asian session, pausing a two-day winning streak amid a modest uptick in the greenback. The precious metal stayed close to recent weekly highs while traders monitored the upcoming US employment details for direction on future interest rate decisions amid receding September cut bets. In the digital asset space, Bitcoin continued trading above $80,000, sustaining broader risk-on sentiment across cryptocurrencies. Federal Reserve Governor Christopher Waller recently signaled support for a potential pause in interest rates, reducing September rate hike odds to 50%, while Zcash and Ethena emerged among top-performing tokens over a 24-hour window.
As the week draws to a close, attention centers on key labor market metrics in the United States. August payrolls are slated for release, with consensus expectations pointing toward a reading of 58k, while the unemployment rate is projected to hold steady at 4.1% and wage growth is anticipated to moderate slightly to 3% compared to 3.2% previously. In the energy sector, while oil markets appear calmer than in previous months, distillate markets tell a different story, with the US diesel crack spread surging above $100 per barrel for the first time and hitting an intraday record just over $102.00.
