USD rises amid mixed data, yet unable to stop JPY

Today’s headlines

What’s happening: The US dollar edged higher this morning as investors digested the latest economic reports.

What happened: Data released earlier this week showed mixed signals for US economic growth.

Meanwhile, the Japanese yen remained on course to record one of its best weeks in a year versus the US dollar.

Why it matters: Data from the US Labor Department, released on Thursday, showed a lower-than-expected decline in the number of persons filing new applications for unemployment. Initial jobless claims in the US declined by 5,000 to 227,000 in the first week of February. However, the figure was worse than market estimates of 222,000.

That recent data was followed by indicators of a decline in the unemployment rate with upbeat jobs growth numbers in January. Nonfarm payrolls (NFP) rose by 130,000 in January, well above market estimates of 55,000, while the unemployment rate eased to 4.3%, signalling some stability in the labour market.

Existing home sales declined by 8.4% to an annualised rate of 3.91 million in January and missed market estimates of 4.18 million.

Investors widely expect the Federal Reserve to keep interest rates unchanged in March, while anticipating two rate cuts of 25 bps each later this year.

The Japanese yen recorded gains for the fourth straight session versus the dollar on Thursday, following Prime Minister Sanae Takaichi’s victory in the general elections, which gave her a solid mandate to pursue higher spending and tax cuts. If the yen continues to be strong today, it will record the biggest weekly surge since February 2025.

The Australian dollar traded close to three-year highs against the US dollar amid hawkish signs from the Reserve Bank of Australia.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.1% to 96.98 this morning.

The USD/JPY rose around 0.2% to 153.11 this morning, while the AUD/USD forex pair traded almost flat at 0.7090.

What to watch: Investors await the release of the US consumer price index report (1730 UAE Time), which is expected to shape the Federal Reserve’s monetary policy. The CPI is expected to show headline inflation slowing from 2.7% to 2.5%, while core inflation is expected to ease from 2.6% to 2.5%.

The markets today

UK stocks in focus today ahead of jobs data next week

Context: Equity markets in the UK closed lower on Thursday, after settling at a record high in the previous session.

Details: Data released on Thursday showed the UK economy growing by 1.0% year-over-year in the fourth quarter, easing from 1.2% in the previous quarter. The figure also missed market estimates of 1.2%. The latest reading signalled the weakest annual growth since the second quarter of 2024.

Industrial production contracted by 0.9% in December, compared to market estimates of a flat reading and following 1.3% growth in the previous month.

The UK trade deficit shrank to £4.34 billion in December from £5.56 billion in November. This marked the smallest deficit since August 2025.

Declines in mining, energy and banking shares weighed on the overall market on Thursday. Oil giants, including BP and Shell, recorded losses amid softer crude prices. Mining stocks also recorded sharp losses due to a decline in metals prices.

Banking stocks came under pressure, with shares of HSBC, Barclays, Standard Chartered and Lloyds, all closing the session lower.

UK’s FTSE 100 fell 0.67% to close at 10,402.44, while the domestically focused FTSE 250 index slipped 0.48% to settle at 23,304.99 on Thursday.

What to watch: Investors await the release of jobs data from the UK, scheduled for release on Tuesday. The UK unemployment rate, which stood at 5.1% during the three months to November, is expected to remain unchanged in December.

The number of employed people in the UK, which surged by 82,000 to 34.303 million in the three months to November, is expected to decline by 40,000 in December. Total average weekly earnings, including bonuses, which surged by 4.7% year-over-year to £741 in the three months to November, are expected to rise by 4.4% in December.

Other Markets: US trading indices closed lower on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.34%, 1.57% and 2.04%, respectively.

The news shaping the markets

Russia launched several ballistic missiles and drones at cities in Ukraine in overnight attacks on Thursday. The news sent the USD/RUB pair lower in forex trading this morning.

China’s new home prices dipped 3.1% year-over-year in January following a 2.7% decline in December, which lent support to the USD/CNY forex pair.

New Zealand’s visitor arrivals jumped 7.0% year-over-year to 502,600 in December, driven mainly by gains from Australia, which sent the NZD/USD pair higher in forex trading this morning.

South Korea’s import prices fell 1.2% year-over-year in January following a 0.3% gain in the previous month, lending support to the USD/KRW forex pair.

Israel’s trade deficit rose to $3.14 billion in January from $2.8 billion in the year-ago month. However, the USD/ILS pair fell in forex trading this morning.

What else to watch today

Spain’s inflation rate (1200 UAE Time), Eurozone’s balance of trade (1400 UAE Time), employment change (1400 UAE Time) and GDP growth rate (1400 UAE Time), Russia’s interest rate decision (1430 UAE Time) and inflation rate (2000 UAE Time), India’s bank loan growth (1530 UAE Time), deposit growth (1530 UAE Time) and foreign exchange reserves (1530 UAE Time), Brazil’s retail sales (1600 UAE Time), Canada’s new motor vehicle sales (1730 UAE Time) as well as US Baker Hughes oil rig count (2200 UAE Time) and total rigs count (2200 UAE Time).