Strong Labor Data Couldn’t Boost Dollar, Gold Hits High

Strong labor data couldn’t boost the Dollar; Gold hits high. Key events to watch: markets eye unemployment claims and the Fed speech.

U.S. Session Recap: Strong Labor Data Fails to Boost Dollar

The U.S. labor market showed resilience in January, with the ADP Employment report revealing a significant jump in private payrolls. The report indicated a gain of 183,000 jobs, surpassing the forecast of 148,000 and marking a notable improvement from December’s revised figure of 176,000. Sectors such as trade, transportation, utilities, leisure and hospitality, and education and health services led the gains, while manufacturing saw job losses. Despite the robust labor data, the U.S. dollar index (DXY) remained under pressure, hitting an overnight low of 107.29 as fears of a global trade war subsided temporarily.

On the services front, the Institute for Supply Management (ISM) reported that U.S. services activity expanded for the seventh consecutive month, with a January PMI reading of 52.8. While this marked another month of growth, it was a moderation from December’s 54.0, as sub-indices such as business activity and new orders eased. The dollar’s weakness persisted despite the strong macroeconomic data, as investors remained cautious amid shifting global trade dynamics.

Implications for the Asia Session: Gold Shines Amid Uncertainty

The Asia session will operate in a mixed environment, marked by reduced trade tensions between the U.S., Mexico, and Canada but escalating tensions with China. This backdrop has helped bolster gold prices, which reached a record high of $2,882.27 per ounce on Wednesday before retreating slightly. Spot gold was trading around $2,870 at the start of the Asia session and will remain elevated in the coming days as investors turn to safe-haven assets amidst global uncertainty.

Strong Labor Data Couldn’t Boost Dollar, Gold on the Rise

Key Events to Watch: Unemployment Claims and Fed Speech

Today’s focus will be U.S. unemployment claims, scheduled for release at 1:30 pm GMT. Claims have moderated over the past eight weeks, reflecting stability in the labor market. Last week’s figure of 207,000 is expected to edge higher to 214,000 but remain below the 12-week average of 218,000, potentially providing near-term support for the dollar. Later, Federal Reserve Governor Christopher Waller will speak at the Atlantic Council’s Global Headquarters in Washington D.C. at 7:30 pm GMT. Market participants will be keen to glean insights into future monetary policy following last week’s FOMC meeting, where the Fed maintained rates at 4.25-4.50%.

Central Bank Notes: Fed Holds Steady Amid Balanced Risks

The Federal Reserve’s latest meeting on 29 January saw the Board of Governors unanimously vote to maintain the Federal Funds Rate at 4.25-4.50%. The Committee emphasized its commitment to achieving maximum employment and 2% inflation over the longer term, noting that risks to these goals are roughly balanced. While economic activity has expanded at a solid pace and labor market conditions remain strong, inflation remains somewhat elevated. The Fed’s Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025, totaling 50 basis points, compared to the percentage point of reductions projected in the previous quarter.

Currency and Commodity Outlook

• Gold (XAU): Medium Bullish. Gold prices remain elevated amid ongoing market uncertainty, with potential for further gains if trade tensions escalate.
• Australian Dollar (AUD): Medium Bullish. Despite domestic challenges, the AUD has appreciated this week as demand for the U.S. dollar wanes.
• New Zealand Dollar (NZD): Medium Bullish. The Kiwi has held up well despite soft labor market data, supported by reduced demand for the greenback.
• Japanese Yen (JPY): Medium Bearish. Robust wage growth and hawkish Bank of Japan expectations continue to support the yen, with USD/JPY dipping below 153.50.
• Euro (EUR): Medium Bullish. Weak retail sales data may weigh on the Euro, but dollar weakness has provided support, with EUR/USD hitting an overnight high of 1.0442.
• Swiss Franc (CHF): Medium Bearish. The franc remains strong amid global trade tensions, with USD/CHF down over 2% this week.
• Pound (GBP): Weak Bullish. The Bank of England’s Monetary Policy Report and construction PMI data will be key drivers for the pound today.
• Canadian Dollar (CAD): Medium Bearish. Solid PMI data could provide additional support for the Loonie, which has appreciated strongly this week.
• Oil: Medium Bearish. Crude prices remain under pressure following a significant build in EIA inventories and concerns over sluggish global growth.

Conclusion

The Asia session is poised to reflect the mixed signals from the U.S., with gold likely to remain a key beneficiary of ongoing market uncertainty. Meanwhile, currency markets will closely watch U.S. unemployment claims and Fed Governor Waller’s speech for clues on future monetary policy. As trade tensions and central bank actions continue to shape the global economic landscape, investors should brace for heightened volatility in the days ahead.

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