ECB Cuts Rates, But Focus Shifts to U.S. Job Data

Hello traders, welcome to Friday, the most significant trading day of the week as the highly anticipated U.S. Non-Farm Payrolls (NFP) report is set to be released. This report is expected to have a major impact on the U.S. dollar, stock markets, and commodities, setting the tone for the next trading sessions. Markets have been cautious in the lead-up to this data, with Thursday being a quieter session, but still delivering some important developments.

The biggest headline from Thursday was the European Central Bank’s decision to cut interest rates by 25 basis points, confirming the beginning of monetary easing in the Eurozone. While the move was widely expected, traders are now focused on the ECB’s future rate path, which remains uncertain due to persistent inflation concerns. The euro’s reaction was relatively muted, as the decision had already been priced in.

In Canada, the Ivey PMI provided a surprise to the upside, coming in at 55.3, signaling continued expansion in the Canadian economy. The Canadian dollar strengthened slightly, but with the Canadian employment report due today, the market is holding off on major moves until the data is released.

Stock markets saw mixed reactions on Thursday, with U.S. indices remaining under pressure, struggling to recover from recent losses. The Nasdaq, in particular, continued to decline, reflecting concerns about tech stocks after Nvidia’s earnings failed to trigger a major rally. In contrast, European indices held up better, showing resilience despite concerns over trade tensions and economic uncertainty. Futures ahead of the European session are mixed, with U.S. futures slightly in the red, while European indices attempt a modest recovery.

In the currency market, the U.S. dollar traded cautiously, with traders awaiting today’s crucial NFP data. The euro remained stable following the ECB rate cut, as there were no unexpected policy shifts. The Japanese yen gained strength, reflecting a risk-off sentiment as investors turned to safe-haven assets. Meanwhile, the Canadian dollar held steady after the strong Ivey PMI but remains vulnerable to today’s employment figures.

Commodities have been under pressure, with oil struggling to find support after setting new long-term lows earlier in the week. Gold and silver held steady on Thursday, supported by a weaker U.S. dollar, but profit-taking has limited any major gains. Metals remain mixed, with gold showing resilience and silver struggling to maintain its momentum.

The focus now shifts entirely to today’s U.S. Non-Farm Payrolls, which are expected to come in at 159,000. This data will dictate the next move for the U.S. dollar and stock markets, as traders assess whether the Federal Reserve’s monetary policy outlook needs to be adjusted. Additionally, the Canadian employment report will be closely watched, as it could influence the Canadian dollar’s trajectory. 

Source: https://www.axiory.com/analytics/market-news/ecb-cuts-rates-but-focus-shifts-to-u-s-job-data