The U.S. dollar bull trend faces a significant test (Daily analysis 5.02.2021)

The U.S. dollar is dominant at the start of the month. So far this week, it has gained against all G-10 peers. Investors eye jobs report for January.

The EUR/USD pair failed to stabilise above the 1.20 handle, and the main currency pair slipped to the 1.1950 area. As a consequence, the greenback trades at the highest levels in two months. Some currencies are less fragile, however. The pound sterling trades bid (and the EUR/GBP exchange rate declines below 0.8750) as the Bank Of England signals no desire to introduce negative rates. Fast progress on the vaccination front is also supportive of the British currency and covers a dire economic situation and strict restrictions that dampen growth. The Canadian dollar is relatively strong as crude oil benchmarks continue their rally. Brent prices approach 60 USD/bbl and WTI trades around 56.50 USD/bbl at the time of writing.

Markets look to jobs report

One of the drivers of the latest U.S. dollar revival is a string of positive surprises in data releases. Today markets will analyse whether it will translate into higher jobs figures. The expectations have recently been rising. The Bloomberg median estimate amounts to around 100K new jobs while the latest batch of forecasts assumes two times stronger employment rise. Consequently, only a huge number is likely to extend the U.S. dollar rally in the remainder of the first trading week of February.