iFOREX Daily Analysis – 05/02/2016

 | Feb 05, 2016 05:18AM ET

The dollar extended losses against a basket of the other major currencies Thursday, as it remained under pressure amid uncertainty over how much the Federal Reserve will be able to raise interest rates this year.

Data on Thursday showed that initial jobless claims rose by a larger than forecast 8,000 to 285,000 last week, but remained in territory usually associated with a firming labor market.

The dollar has now handed back all of the gains made in the wake of last Friday’s shock decision by the Bank of Japan to adopt negative interest rates.

Elsewhere, the pound gave back almost all the day’s gains against the dollar after the Bank of England voted to hold interest rates at current low of 0.5% in a unanimous vote, and also cut its forecasts for economic growth. While the commodity linked currencies remained broadly higher, despite oil prices retreating from earlier highs.

Today in the euro zone, Germany is to publish a report on factory orders; the Swiss National Bank is to publish data on its foreign currency reserves; Canada is to publish its monthly employment report and data on the trade balance; while The U.S. is to round up the week with the closely watched report on nonfarm payrolls and data on the trade balance.

The Labor Department's Bureau of Labor Statistics is expected to report that nonfarm payrolls increased by 188,000 in January, falling sharply from December's robust gain of 292,000. It would mark the first month that the figure dipped under 200,000 since September. The unemployment rate, meanwhile, is expected to remain unchanged at 5.0%.

EUR/USD

The euro surged on Thursday to fresh 3 months highs, extending sharp gains from the previous session, as currency traders continued to gear up for the likelihood of a disappointing U.S. jobs report which could cap a stellar week for the euro.

The currency pair traded in a broad range between 1.1070 and 1.1238, before settling up 1.04% on the session. The euro soared above 1.12 against the dollar for the first time since late October, then held onto the gains to post its strongest two day move since the August flash crash. EUR/USD has closed higher in each of the last four sessions, jumping more than 3.3% from last Friday's lows, after the Bank of Japan propped up the dollar with a shocking decision to push interest rates into negative territory.

Today investors are looking to the U.S. nonfarm payrolls report for January, for fresh indications on the strength of the labor market.