The EURUSD pair moved sharply lower on Thursday, February 4, down 0.61% at 1.1961. This sharp pullback triggered strength in the greenback across the board and a decline in the EURGBP cross pair, which plunged 90 pips to 0.8745.

Sterling locked in strong gains after yesterday’s BoE meeting. Monetary Policy Committee members voted unanimously to keep interest rates on hold at 0.10% and quantitative easing (QE) at £895 bln. Market participants lowered expectations regarding negative rates in the UK, which gave a shot in the arm to the British currency.

The dollar rose amid rising Treasury yields, stabilization of the US labor market and confidence in the economic outlook stateside.

Last week, initial jobless claims totaled 779,000, down from 812,000 in the previous week. Today's non-farm payroll (NFP) report may come in stronger than expected.

The yield on 10-year US bond yields widened 6.65% to 1.1546 amid rising expectations for massive US budget expenditures. Yields also got a boost from mass vaccinations, as a result of which the US economy is expected to achieve a speedy recovery. Against this backdrop, the S&P 500 index rose to a record high.

Today’s macro agenda (GMT+3)

• 11:00 Switzerland: SNW foreign currency reserves (January)
• 11:30 UK: Halifax house price index (January)
• 16:30 US: employment rate and non-farm payrolls (January); US and Canada: balance of trade (December); Canada: employment change and unemployment rate (January)
• 18:00 Canada: Ivey PMI (January)
• 21:00 US: Baker Hughes weekly oil rig count
• 23:00 US: consumer credit change (December)

Current outlook

Major currencies have been trading slightly higher in Asian trading and entered positive territory near the European opening. At the time of writing, the euro was trading at 1.1985. The single currency remains under pressure against the yen, the Canadian dollar and the British pound. Sterling tops today’s leaderboard so far, as it continues to draw support from the fact that the BoE will not take rates below zero at this point.

Today, all eyes will be on the US non-farm payroll report. The US economy is expected to add 50,000 new jobs in January, although the actual number may well overshoot the median consensus.

The EURGBP cross continues to hold at the current level, but there is still a risk that the pair will slide 40 pips to 0.8707. If the decline in this cross picks up momentum, the euro will drop to 1.1925 (on the back of a rising dollar). If the cross declines alongside a depreciating dollar, the price action will continue to hover in the range of 1.1950-1.1960. Today’s wildcard is the NFP report. This indicator is unpredictable, so uncertainty will persist on the market until 13:30 GMT.