Markets briefly rallied on surprisingly strong January employment data that blew past expectations, though skepticism remained about the Federal Reserve’s rate-cutting path as policymakers emphasized the need for clear evidence of sustained disinflation before supporting further easing.
Check out the forex news and economic updates you may have missed in the latest trading session!
Forex News Headlines & Data:
- Australia Investment Lending for Homes for December 31, 2025: 7.9% (5.0% forecast; 17.6% previous)
- Australia Home Loans QoQ for December 31, 2025: 10.6% (2.0% forecast; 4.7% previous)
- China CPI Growth Rate for January 2026: 0.2% m/m (0.4% m/m forecast; 0.2% m/m previous); 0.2% y/y (0.5% y/y forecast; 0.8% y/y previous)
- China PPI Growth Rate for January 2026: -1.4% y/y (-1.7% y/y forecast; -1.9% y/y previous)
- U.S. MBA Mortgage Applications for February 6, 2026: -0.3% (-8.9% previous)
- U.S. MBA 30-Year Mortgage Rate for February 6, 2026: 6.21% (6.21% previous)
- Canada Building Permits for December 2025: 6.8% m/m (9.7% m/m forecast; -13.1% m/m previous)
- U.S. Nonfarm Payrolls for January 2026: 130.0k (40.0k forecast; 50.0k previous)
- U.S. Unemployment Rate for January 2026: 4.3% (4.5% forecast; 4.4% previous)
- U.S. Average Hourly Earnings for January 2026: 0.4% m/m (0.3% m/m forecast; 0.3% m/m previous); 3.7% y/y (3.8% y/y forecast; 3.8% y/y previous)
- Kansas City Federal Reserve President Jeffrey Schmid noted inflation as “hot” and elevated in a speech on Wednesday
- U.S. EIA Crude Oil Stocks Change for February 6, 2026: 8.53M (-3.46M previous)
- U.S. Monthly Budget Statement for January 2026: -95.0B (-90.0B forecast; -145.0B previous)
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Broad Market Price Action:
Wednesday’s session delivered mixed performances as traders embraced stronger-than-expected January employment data that showed the U.S. added 130,000 jobs versus forecasts of 40,000, though the rally occurred against a complex backdrop of relatively hawkish Federal Reserve commentary and significant downward revisions to 2025 employment figures.
US equities closed relatively flat on the day, with the S&P 500 climbing 0.07% to close around 6,945. The index traded sideways during Asian and early London hours before catching a a quick bid following the 8:30 am ET jobs data release, though gains remained subdued throughout the session. The following pullback likely reflected caution as Kansas City Federal Reserve President Jeffrey Schmid noted inflation as “hot” and elevated in a speech on Wednesday. Also, the benchmark revision showing just 181,000 jobs added across all of 2025 (revised down from the initially reported 584,000) likely provided a sobering counterweight to January’s upside surprise.
Gold advanced 0.85% to settle around $5,085 per ounce, spending most of the session above its Asia open price around $5,042. The precious metal rallied sharply during the London morning session, pushing to session highs near $5,120 ahead of the 8:00 am ET hour before pulling back modestly following the stronger-than-expected employment data. Gold consolidated through the US afternoon with relatively low volatility, closing well above its session lows. The advance likely reflected ongoing positioning ahead of Friday’s CPI data, with the pullback from session highs possibly correlating with reduced near-term Fed rate cut expectations following the payrolls beat.
Oil rallied 1.57% to close near $64.90 per barrel, with WTI crude experiencing its strongest gains during the US afternoon session. The advance appeared disconnected from direct energy-specific catalysts, though the larger-than-expected 8.53 million barrel build in EIA crude stocks (versus forecasts of a drawdown) suggested the move may have reflected broader risk appetite or positioning ahead of upcoming OPEC+ decisions rather than immediate supply-demand fundamentals.
Bitcoin declined 1.44% to trade around $67,629, underperforming traditional risk assets despite the equity market’s positive close. The cryptocurrency weakened steadily from Asian hours through the London close with no apparent crypto-specific catalysts, possibly reflecting ongoing uncertainty in the crypto space on interest rates and possibly continued deleveraging.
Treasury yields advanced modestly, with the 10-year yield rising 0.60% to approximately 4.20%. Yields traded largely sideways through overnight and London sessions before edging higher following the payrolls data, likely reflecting reduced expectations for near-term Fed rate cuts. The bond market move appeared measured given the magnitude of the employment surprise, possibly suggesting traders remain skeptical about the sustainability of January’s hiring pace given the massive 2025 benchmark revisions that showed average monthly job gains of just 15,000 throughout last year.
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FX Market Behavior: U.S. Dollar vs. Majors
The U.S. dollar experienced volatile session-to-session shifts on Wednesday, ultimately closing mixed against major currencies as traders navigated stronger-than-expected employment data against a backdrop of cautious Federal Reserve commentary and heightened geopolitical uncertainty.
During the Asian session, the dollar traded net bearish against the major currencies. Chinese inflation data released during Asian hours came in softer than expected, with January CPI rising just 0.2% year-over-year versus forecasts of 0.5%, though the data generated limited immediate currency market reaction. Australian housing finance figures showed surprising strength, with investment lending for homes surging 7.9% versus expectations of 5.0%, providing modest support to the Australian dollar during the session.
The London session saw the dollar stabilize but continue trading with a net bearish lean before beginning to rebound ahead of the US open. There were no major European data releases to potentially drive directional moves, though traders likely began positioning cautiously ahead of the delayed US employment report. The Bank of Canada’s Summary of Deliberations published at 1:30 pm GMT showed officials view the path forward for rates as unusually difficult to predict, citing heightened uncertainty from geopolitical turbulence, the upcoming USMCA review, and trade disruptions as important risks to the outlook. This dovish characterization likely contributed modest pressure to the Canadian dollar during late London hours.
The US session brought dramatic volatility surrounding the 8:30 am ET employment data release. The dollar leaned net bullish heading into the London close as January non-farm payrolls came in at 130,000 (versus 40,000 expected and a revised 48,000 in December), with the unemployment rate falling to 4.3% from 4.4%. The upside surprise initially sparked dollar strength as traders pared expectations for near-term Fed rate cuts, with the probability of a June reduction falling below 50%.
However, the dollar’s advance proved short-lived. After the London close, the greenback pulled back until mid-US afternoon before stabilizing and drifting with a slight bullish lean heading into the session close. This reversal likely reflected several factors: first, the massive benchmark revision showing just 181,000 jobs added across all of 2025 (down from 584,000 initially reported) cast doubt on the reliability of recent labor market readings. Second, we got another relatively hawkish comment from Kansas City Federal Reserve President Jeffrey Schmid, who noted inflation as “hot” and elevated, reinforcing that the Fed likely remains in wait-and-see mode on rate cuts.
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Upcoming Potential Catalysts on the Economic Calendar
- Japan PPI for January 2026 at 11:50 pm GMT
- Australia Consumer Inflation Expectations for February 2026 at 12:00 am GMT
- U.S. Fed Logan Speech at 12:00 am GMT
- U.K. RICS House Price Balance for January 2026 at 12:01 am GMT
- U.K. GDP Growth Rate Prel for December 31, 2025 at 7:00 am GMT
- U.K. Manufacturing & Industrial Production for December 2025 at 7:00 am GMT
- U.K. Goods Trade Balance for December 2025 at 7:00 am GMT
- U.K. NIESR Monthly GDP Tracker for January 2026
- U.S. Initial Jobless Claims for February 7, 2026 at 1:30 pm GMT
- U.S. Existing Home Sales for January 2026 at 3:00 pm GMT
- Euro area ECB Lane Speech at 6:30 pm GMT
- Bank of Canada Rogers Speech at 6:45 pm GMT
Thursday’s calendar features light data releases with Japan’s Producer Price Index potentially providing insight into upstream inflation pressures in the world’s third-largest economy. Australia’s consumer inflation expectations will be closely watched after recent stronger-than-expected housing finance data, while UK housing market sentiment from the RICS survey could influence Bank of England rate cut expectations.
Fed’s Logan has another scheduled appearance at midnight GMT that could provide additional color on how policymakers are interpreting Wednesday’s employment data and whether the upside surprise materially changes the outlook for rate cuts. Given her hawkish stance expressed in Tuesday’s speech, traders will listen closely for any shift in tone regarding the timing of potential policy adjustments.
The relatively sparse economic calendar suggests markets may consolidate Wednesday’s moves as traders digest the complex signals from January’s labor market report and await Friday’s critical CPI data that could prove more influential for near-term Fed policy decisions.
Stay frosty out there, forex friends!
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