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UK labour market report highlights the agenda in Europe today

The greenback is leading gains across the board in the major currencies space as we look towards European trading. Higher yields is one of the reasons for that, adding to an escalation in geopolitical tensions as well in the Middle East. US futures are holding lower and that is also playing a part, weighing on the risk mood going into the session ahead.

On the domestic front, Trump’s resounding victory in the Iowa caucus all but confirms expectations for a rematch with Biden later this year. That will be another risk factor for markets to consider in the bigger picture but not any time soon at least. For now, the outlook for central banks and inflation will continue to dominate the landscape.

Looking to European trading, the dollar sits in a good spot and could look to build further on the gains this week. EUR/USD might be angling for a drop below 1.0900 while USD/JPY is hoping to secure a daily break above the 146.00 mark. At the same time, USD/CAD is inching closer towards its 200-day moving average at 1.3480 while AUD/USD and NZD/USD are down to fresh one-month lows nearing 0.6610 and 0.6160 respectively on the day.

While yields are sitting higher today, I’d be wary that we still could see a shake up in US trading later. The strong bid in the front-end of the curve in Treasuries at the end of last week is still a head scratcher and that may come up again later in the day. So, keep an eye out for that just in case it does happen.

In terms of data, the UK labour market report is in focus but as mentioned here, it continues to come with a caveat as it has in recent months. The pound will still be a focus point in case there are signs of weakness but barring any surprises, the data should not be too impactful.

Besides that, there is the January ZEW survey which should just reaffirm more sluggish conditions in the German economy to start the year.

0700 GMT – Germany December final CPI figures
0700 GMT – UK December payrolls change
0700 GMT – UK November ILO unemployment rate, employment change
0700 GMT – UK November average weekly earnings
0900 GMT – Italy December final CPI figures
1000 GMT – Germany January ZEW survey economic sentiment

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

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