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[MARKET ANALYSIS] DXY slightly lower heading into US NFP, JPY continues to gain, AUD bid after RBA's Hauser said inflation is "too high"

The DXY is slightly lower as traders await the US NFP report, which may dampen expectations given recent weak labor metrics.

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[MARKET ANALYSIS] DXY slightly lower heading into US NFP, JPY continues to gain, AUD bid after RBA's Hauser said inflation is "too high"

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  • DXY is slightly lower this morning and trades towards the lower end of a 96.49-96.91 range. Focus for the day lies solely on the US NFP report in the afternoon. The delayed January jobs data is expected to show 70k nonfarm payrolls added in the month (vs a prev. 50k; with the range of forecasts between -10k to +108k); the unemployment rate is expected to remain steady at 4.4%. Recent labour metrics are painting a subdued picture for the labour market, and commentary via WH Economic Adviser Hassett also dampened expectations ahead of the report today. Following his remarks, Bloomberg’s NFP whisper number dropped to 37k (prev. 50k).
  • JPY remains at the top of the pile, continuing to extend on the recent strength seen following PM Takaichi’s landslide victory. As mentioned in the coverage since the election, there are numerous factors helping buoy the JPY; a) BoJ potentially to normalise faster, b) less friction for Japanese officials to conduct intervention, c) hefty flows to Japanese equities, d) FinMin Katayama suggesting that surplus foreign reserves could help to fund the food tax suspension. USD/JPY briefly dipped below the 153.00 mark, and currently holds within a 152.79-154.51 band. The pair is now approaching the touted rate check/intervention lows seen late Jan (152.09).
  • G10s are firmer against the USD to varying degrees. JPY outperforms (mentioned above), whilst the Aussie follows closely behind. AUD/USD has now breached above the 0.70 mark, to now trade at levels not seen since Feb’23. The pair currently trades around 0.7113, and further upside could see a test of the high from 2nd Feb 2023 at 0.7157. Recent strength comes amidst the continued strength in underlying metals prices, and after commentary from RBA’s Hauser. He noted that inflation is too high, which they can't let persist and will do what is needed to bring inflation back to the target band.
  • Elsewhere, EUR is slightly firmer and trades around the 1.19 mark, and off recent highs which saw the single currency top 1.2000 in late January. A weak US jobs report could see another bid higher for EUR/USD, which may lead to ECB doves to push for an FX-led rate cut. No move was seen after the ECB Wage Tracker, where the 2026 annual estimate was increased to 2.388% (prev. 2.316%). 
  • The NOK continues to strengthen against the EUR in the aftermath of Tuesday’s hotter-than-expected Norwegian inflation data; a report which led some banks to push back calls for Spring cuts. EUR/NOK is currently at session lows, in a 11.2638-11.3300 range.
Context

Meanwhile, the JPY is benefitting from perceptions of a potential faster normalization by the BoJ, while the AUD gains follow comments from RBA's Hauser about tackling high inflation. Overall, market movements reveal a mix of positioning ahead of U.S. data and central bank dynamics influencing multiple currency pairs.

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