Forex News

• GBP/JPY edges higher on Friday as the Japanese Yen remains on the defensive amid ongoing energy shocks in the Middle East.
• The British Pound holds firm while traders assess the political fallout from UK local elections.
• Technically, the pair maintains a constructive outlook above the 100-day and 200-day SMAs.

GBP/JPY edges higher on Friday as the Japanese Yen (JPY) continues to face selling pressure despite suspected intervention by Japanese authorities earlier this week. At the time of writing, the cross is trading around 213.31, up nearly 0.30% on the day after reversing part of the losses registered earlier this week.

The Japanese Yen is struggling to gain traction amid elevated Oil prices and ongoing supply disruptions through the Strait of Hormuz. A significant portion of Japan’s energy imports comes from the Middle East, leaving the economy particularly vulnerable to rising import costs and slower economic growth.

Meanwhile, the British Pound (GBP) is holding firm across the board as investors assess the political landscape following the UK local elections, where Prime Minister Keir Starmer’s Labour Party reportedly suffered notable losses.

That said, GBP/JPY’s broader uptrend remains intact due to the wide interest rate differential between the Bank of England (BoE) and the Bank of Japan (BoJ). With ongoing energy shocks raising inflation risks, this divergence could widen further as expectations grow that central banks may need to raise interest rates to contain inflationary pressure.

Technical Analysis:

On the daily chart, GBP/JPY holds a constructive bias as it remains above both the 100-day Simple Moving Average (SMA) at 212.11 and the longer-term 200-day SMA at 207.12. Price is consolidating just under the nearby horizontal barrier at 214.50, suggesting the broader uptrend is intact but facing topside friction, while a soft Relative Strength Index (RSI) near 47 and a negative Moving Average Convergence Divergence (MACD) reading hint at waning bullish momentum in the very near term.

On the topside, immediate resistance is located at 214.50, and a clear daily close above this level would reopen the path to further gains. On the downside, initial support is seen at the 100-day SMA at 212.11, followed by the horizontal floor at 210.00, with the 200-day SMA at 207.12 reinforcing a deeper medium-term demand zone if the pullback extends.

(The technical analysis of this story was written with the help of an AI tool.)

TD Securities strategists expect April United States (US) Consumer Price Index (CPI) to show firmer inflation, with core CPI seen at 0.38% m/m and 2.8% y/y, and headline at 0.56% m/m and 3.7% y/y. The rebound in shelter and higher airfares linked to Oil are key drivers, while core inflation is projected to peak near 2.9% in Q2 before gradually easing.

Shelter rebound and airfares drive core

"We look for core inflation to rise to 0.38% m/m, largely owing to the rebound in shelter prices after the government shutdown kept the segment atypically subdued in October. The ongoing oil shock should also manifest in the core through stronger-than-usual airfares."

"We expect headline CPI to post a firmer 0.56% m/m gain owing to a ~5% increase in gasoline prices. Food inflation likely rebounded as well after printing flat in March. We project the core CPI rose to 2.8% on a y/y basis, with headline inflation moving north by another 0.4pp to 3.7%—a three-year-high. We see the risks to our forecasts skewed to the upside in the event pass-through from jet fuel prices to airfares is larger than we are assuming."

"Following the rebound from the gov't shutdown and the ongoing oil-price shock we anticipate the core segment will peak at 2.9% in Q2—though the ongoing Iran conflict provides upside risks to our forecast. We remain of the view that gradual disinflation should be in the cards as a possible scenario toward the end of the year."

"We expect headline CPI rose 0.56% m/ m in April, with the energy component continuing to act as a catalyst for the move higher. Food inflation likely rebounded after printing flat in March. Note that our CPI NSA forecast at 332.714 is slightly below the market's current fixing at 332.780."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Nonfarm Payrolls (NFP) in the United States (US) rose by 115K in April, the US Bureau of Labor Statistics (BLS) reported on Friday. This print followed the 185K increase (revised from 178K) recorded in March and surpassed the market expectation of 62K by a wide margin.

Other details of the report showed that the Unemployment Rate remained unchanged at 4.3% as expected, while the Labor Force Participation Rate edged lower to 61.8% from 61.9%. Finally, annual wage inflation, as measured by the change in the Average Hourly Earnings, rose to 3.6% from 3.4% in March but came in below analysts' estimate of 3.8%.

"The change in total nonfarm payroll employment for February was revised down by 23,000, from -133,000 to -156,000, and the change for March was revised up by 7,000, from +178,000 to +185,000," the BLS noted in its press release. "With these revisions, employment in February and March combined is 16,000 lower than previously reported."

Market reaction to US Nonfarm Payrolls

The US Dollar struggles to attract buyers despite the upbeat employment data. At the time of press, the US Dollar Index was down 0.4% on the day at 97.88.

This section below was published as a preview of the US Nonfarm Payrolls data at 04:00 GMT.

• Nonfarm Payrolls are expected to rise by 62K in April.
• The Unemployment Rate is seen holding steady at 4.3%.
• The USD is set to experience heightened volatility heading into the weekend.

The United States (US) Bureau of Labor Statistics (BLS) will release the Nonfarm Payrolls (NFP) data for April on Friday at 12:30 GMT. 

Investors will scrutinize the underlying details of the employment report to assess whether the Federal Reserve (Fed) is likely to consider an interest-rate cut later in the year. 

What to expect from the next Nonfarm Payrolls report?

Investors expect NFP to rise by 62K following the surprisingly strong 178K increase recorded in March. The Unemployment Rate is expected to remain unchanged at 4.3%, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, is projected to rise to 3.8% from 3.5%.

Previewing the employment report, TD Securities analysts note that they expect to see signs of stabilization in the labor market after three volatile months.

“NFP likely increased 80K, with 85K private gains and 5K government job losses. Healthcare and leisure & hospitality will likely support most of the improvement. The Unemployment Rate rate should continue showing stabilization at 4.3%. We also expect Average Hourly Earnings to stay modest at 0.2% m/m, with the y/y moving up to 3.7%,” they add.

Automatic Data Processing (ADP) reported earlier in the week that employment in the private sector rose by 109K in April. This print followed the 61K (revised from 62K) increase reported in March. Assessing the report’s findings, “small and large employers are hiring, but we're seeing softness in the middle,” said Dr. Nela Richardson, chief economist at ADP. Meanwhile, the Employment Index of the Institute for Supply Management’s (ISM) Services Purchasing Managers’ Index (PMI) survey improved to 48 in April from 45.2 in March, reflecting an ongoing contraction in the service sector payrolls, albeit at a softening pace. 

How will the US March Nonfarm Payrolls affect EUR/USD?

The US Dollar (USD) has been struggling to stay resilient against its rivals since the beginning of May, even though the Federal Reserve’s (Fed) April policy meeting delivered a hawkish surprise, with three policymakers dissenting against the inclusion of an easing bias within the policy statement. Improving risk mood on easing geopolitical tensions in the Middle East and suspected foreign exchange market interventions by Japan emerge as primary drivers behind the USD weakness.

In the post-meeting press conference, Fed Chair Jerome Powell acknowledged that the labor demand has clearly softened but refrained from steering away from a neutral guidance because of inflation risks. “Policy is not a preset course,” Powell added, and reiterated that they are in a good place to move in either direction. In the meantime, Chicago Fed President Austan Goolsbee argued that gains in payrolls are not a good measure of labor slack anymore and noted that the labor market is “stable but not great.”

According to the CME FedWatch Tool, markets are currently pricing in about a 70% probability that the Fed policy rate will remain unchanged at the range of 3.5%-3.75% by the end of 2026. They also see a 13% chance of a 25 basis points (bps) hike and a nearly 17% odds of a 25 bps cut.  

A significant negative surprise, a reading below 30K, in the headline NFP print, especially if combined with an uptick in the Unemployment Rate, could revive expectations for an interest rate cut by year-end and cause the USD to come under selling pressure with the immediate reaction. 

Conversely, an upbeat NFP print, near or above the market expectation, could cause investors to refrain from pricing in policy easing later this year, as healthy labor market conditions are likely to allow Fed policymakers to take their time to assess the inflation dynamics before deciding on the next step. In this scenario, the USD could stay resilient against its peers and limit EUR/USD’s upside. However, even in this case, a strong USD rally could be hard to come by if markets remain risk-positive heading into the weekend. 

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“EUR/USD’s near-term technical outlook points to a bullish tilt. The Relative Strength Index (RSI) indicator on the daily chart rises toward 60 and the pair holds comfortably above the 100-day and the 200-day Simple Moving Averages (SMA).”

“EUR/USD could face the next strong resistance area at 1.1800-1.1810, where the upper hand of the Bollinger Band and the Fibonacci 61.8% retracement of the February-April downtrend align. If the pair manages to clear this level, 1.1900-1.1910 (round level, Fibonacci 78.6% retracement) could be seen as the next hurdle before 1.2000 (psychological level, round level).”

“On the downside, an important support area seems to have formed at 1.1710-1.1680 (100-day SMA, 200-day SMA). In case EUR/USD retreats below this region and starts using it as resistance, 1.1650 (Fibonacci 38.2% retracement) could act as an interim support level before 1.1560 (Fibonacci 23.6% retracement).”

• The Unemployment Rate in Canada rose to 6.9%.
• USD/CAD flirts with the 1.3680 zone in the wake of the release.

Statistics Canada reported on Friday that the Unemployment Rate climbed to 6.9% in April, surpassing what markets were expecting.

Additionally, the Net Change in Employment decreased by 17.7K jobs, reversing the 14.1K gain we saw in the prior month. In addition, the participation rate rose a tad to 65% and wages are growing at a 4.8% annual pace, down from March’s 5.1% annual gain.

Market reaction

The Canadian Dollar (CAD) maintains a negative bias following the publication of the jobs report on Friday, with USD/CAD navigating below the 1.3700 region, the upper end of its weekly range.

This section below was published as a preview of the Canadian labour market report at 08:00 GMT.

• The Canadian Unemployment Rate is seen holding steady in April.
• The BoC is expected to stay put at its June 10 meeting.
• The Canadian Dollar remains on the defensive vs the Greenback this week.

Statistics Canada will release its Labour Force Survey on Friday, and markets are bracing for quite a steady print. The Unemployment Rate is expected to remain at 6.7% in April, while the Employment Change is forecast to increase by 15K following a 14.1K gain in the previous month.

Despite the tone of the report, the bar for a change of direction by the Bank of Canada (BoC) should remain pretty high. Indeed, the central bank is expected to maintain its steady hand at its June 10 gathering, following four consecutive “on hold” decisions.

At its latest event, the BoC signalled an upbeat medium-term outlook for economic growth while revising inflation higher for the current year. In addition, Governor Tiff Macklem delivered a cautious message at his press conference, keeping the data-dependent stance well in place while leaving the door open to higher rates in case energy prices remain elevated.

So far, market participants expect around 45 basis points of tightening by the bank by year-end.

What can we expect from the next Canadian Unemployment Rate print?

Consensus among analysts sees Canada’s Unemployment Rate at 6.7% last month. Additionally, investors forecast the economy will add around 15K jobs in April, a tad higher than March’s 14.1K gain. It is worth recalling that Average Hourly Wages rose at an annualised 5.1% in March (from 4.9%), pointing to sticky wage inflation.

When is the Canada Unemployment Rate released, and how could it affect USD/CAD?

All eyes in Canada will be on Friday’s release of the jobs report, due at 12:30 GMT. A stronger print could give the Canadian Dollar (CAD) a quick lift, but don’t expect fireworks.

USD/CAD has been on a steady uptrend this week, almost entirely to the tune of developments from the Middle East and dynamics around the US Dollar (USD).

Pablo Piovano, Senior Analyst at FXStreet, points out that USD/CAD has been edging higher in the last few days, reclaiming the 1.3600 barrier and approaching 1.3650. Further up comes the weekly top at 1.3714 (April 24), an area reinforced by the provisional 55-day and 100-day SMAs around 1.3720. Further north emerges the always relevant 200-day SMA near 1.3815.

On the flip side, he highlights initial support at the May floor of 1.3549 (May 1), seconded by the March base at 1.3525 (March 9), the February valley at 1.3504 (February 11) and the 2026 bottom at 1.3481 (January 30).

“Momentum favours extra declines,” he adds, noting that the Relative Strength Index (RSI) is hovering near 43 and the Average Directional Index (ADX) just over 24 suggests the underlying trend appears to be gathering traction.