Forex Today: Euro drops after ECB, US Dollar mixed despite risk aversion; focus turns to NFP

During the Asian session, the Reserve Bank of Australia will release its Monetary Policy Statement. Australia will also report Home Loans data, while China will release the Caixin Services PMI. The key event of the day will be the US employment report. The jobs number could be critical for the US Dollar that weakened on Thursday, even amid risk aversion. 

Here is what you need to know on Friday, May 5: 

Wall Street dropped again on the back of banking concerns, and US bond yields hit fresh monthly lows amid expectations of rate cuts from the Federal Reserve during the second half of the year. Although the US Dollar Index (DXY) rose modestly boosted by the decline in EUR/USD, the Greenback lost ground against most of its rivals, not helped by risk aversion.

Economic data from the US showed a 6.3% advance (annualized rate) in Unit Labor Costs (ULC) during the first quarter and an increase in Initial Jobless Claims to 242K. On Friday, the key report will be the Nonfarm Payrolls report. Market consensus points to an increase of 179K and the Unemployment Rate to stay at 3.5%.

Analysts at Wells Fargo: 

The European Central Bank (ECB) raised its key interest rates by 25 basis points, marking a slowdown from the previous 50 basis points hikes. The central bank is expected to continue hiking rates in the future. Following the ECB event, the Euro lost ground against the US dollar, with EUR/USD dropping below 1.1000. The pair then rebounded but finished far from the key 1.1100 area.

EUR/GBP posted its lowest daily close in a month, near 0.8750. Meanwhile, GBP/USD rose marginally but was still unable to break above 1.2600, although it closed at its highest level since June 2022.

USD/CHF rose modestly, boosted by the slide of the Euro after the ECB, and settled around 0.8850. On Friday, Switzerland will report consumer inflation.

The Japanese Yen was among the top performers, boosted by risk aversion and lower US yields. USD/JPY trimmed losses late on Thursday, rebounding above 134.00.

AUD/USD rose for the fourth consecutive day but was struggling to retake 0.6700. The Reserve Bank of Australia (RBA) will release the Monetary Policy Statement on Friday.

NZD/USD jumped on Thursday, approaching 0.6300. The Kiwi is among the biggest gainers of the week.

USD/CAD dropped sharply to weekly lows at 1.3515 before consolidating at 1.3540. Canada will release crucial jobs data on Friday with a net change in employment expected to slow to 20K.

After surging earlier on Thursday, Gold pulled back and ended around $2,050 as it continues to look at all-time highs. Silver had the highest close in a year above $26.00. Cryptocurrencies rose, with BTC/USD gaining 1.3%. Crude oil prices finished flat after extreme volatility during the Asian session.