Forex Today: A mixed Dollar awaits NFP after strong US data

After some upbeat US economic reports on Thursday, Friday marks the release of the highly anticipated Nonfarm Payrolls report. During the Asian session, Japan is set to release data, including Household Spending, Bank Lending, and the Leading Index. Later in the day, Germany will release Industrial Production data. Canada will also report labor market data.

Here is what you need to know on Friday, July 7:

The US Dollar posted mixed results, weakening versus the Euro, the Pound, and the Yen, and rising sharply against commodity currencies. Upbeat US data boosted expectations of another interest rate hike from the Federal Reserve (Fed) and weighed on US stocks. The deterioration in market sentiment and lower commodity prices drove the AUD, CAD, and NZD to the downside.

The Dow Jones lost 1.07%, and the Nasdaq tumbled 0.82% on Friday. The decline was accelerated by upbeat US data, as market participants anticipate more monetary tightening ahead. Meanwhile, US Treasury Secretary Yellen is currently in China, and there is a new social platform called Threads by Meta.

The Automatic Data Processing (ADP) report showed an increase in private payrolls of 497K, surpassing the market consensus of 228K. Initial Jobless Claims rose to 248K, while Continuing Claims fell to 1.72 million, the lowest level since February. The ISM Services PMI rose from 50.3 to 53.9 in June, and the Employment Index improved to 54.4. On the negative front, JOLTS Job Openings dropped slightly below expectations in May, falling from 10.3 million to 9.8 million.

Following the data, government bond yields rose in both Europe and the US. The 10-year Treasury bond yield climbed to 4.06%, matching the year-to-date high, while the 2-year yield hit the highest intraday level since 2007 at 5.11%.

On Friday, the US official employment report is due. Market consensus expects the economy to have created 225K jobs in June; however, after the release of recent data, market participants are looking at the possibility of a positive surprise. The unemployment rate is expected to tick lower from 3.7% to 3.6%. Market participants will also be looking at income data. If the numbers confirm that the labor market remains tight, it could cement the likelihood of another interest rate hike from the Fed. However, equally important will be next week's US inflation data.

Data released on Thursday showed that German Factory Orders rebounded more than expected by 6.4%, while Eurozone (EZ) retail sales dropped by 2.3% in May. German data is due on Friday with the release of May Industrial Production figures. European Central Bank's De Guindos is scheduled to speak during the European session. The EUR/USD pair tested the 1.0830 region twice and rebounded towards 1.0900. The Euro benefited from higher EZ yields.

The GBP/USD pair posted its highest daily close in a week near 1.2750, despite negative US data and risk aversion. However, the EUR/GBP pair rebounded from weekly lows to 0.8550.

The Yen held up well and outperformed on Thursday, despite rising government bond yields. The currency was supported by the decline in equity markets. USD/JPY dropped but finished far from the lows, consolidating slightly above 144.00. It was the worst day for the pair in a month. Japan is set to release Household Spending, Bank Lending, and the Leading Economic Index on Friday.

The AUD/USD pair dropped for the second day in a row but found support at the 0.6600 area. The NZD/USD pair pulled back from weekly highs and was rejected again from above 0.6200.

The Loonie lagged on Thursday, with USD/CAD rising for the second day in a row and accumulating a 150-pip gain as it approached 1.3400. Canadian trade data surprised with the largest swing on record, from a CAD 0.89 billion surplus in April to a deficit of 4.3 billion in May, against expectations of a 1.5 billion surplus. The Canadian Employment Report is due on Friday. A positive net change in employment of 20K in June is expected, and the unemployment rate is expected to rise slightly from 5.2% to 5.3%.

The USD/MXN surged on Thursday, having its best day in months. It climbed from the lowest level in years under 17.00 to 17.38.

Metals dropped on the back of higher yields. Gold lost $10 but held above $1,900, while Silver lost 1.75%, falling to as low as $22.50, erasing weekly gains. Cryptocurrencies weakened after the release of negative US data. Bitcoin fell 0.65% to $30,260, and Ethereum dropped to $1,880.