Markets Brace for Crucial US NFP Data to Map Fed Interest Rates

EUR/USD extends its decline for a second consecutive session, trading around 1.1520 during Friday’s Asian session as renewed geopolitical tensions in the Middle East strengthen demand for the US Dollar.

Uncertainty surrounding the Strait of Hormuz continues to weigh on market sentiment, with concerns growing over the prospects of a reopening. Iran’s parliament is reportedly considering a proposal that would ban US and Israeli vessels from the waterway, impose a 20% cargo penalty on ships from hostile nations, and maintain restrictions until the US blockade is lifted. The developments have added to concerns over global trade and energy supplies.

Higher US Treasury yields and a rebound in crude oil prices are also supporting the Greenback while raising concerns about the Federal Reserve’s interest-rate outlook.

Meanwhile, weaker Eurozone data is adding pressure to the Euro. Eurozone Retail Sales unexpectedly fell 0.3% month-on-month in June, missing expectations for a 0.1% increase and almost fully reversing May’s revised 0.4% gain. On an annual basis, Retail Sales growth slowed to 0.7%, its weakest reading since July 2024, compared with expectations for a 1.0% increase and May’s 1.9% rise.

Gold trades slightly above $4,250 during Friday’s Asian session as dip-buying helps the precious metal recover after Thursday’s pullback from levels above $4,300. Despite remaining on track for its strongest weekly performance since January, Gold’s upside appears limited as renewed US Dollar strength and expectations for tighter Federal Reserve policy weigh on demand.

Uncertainty surrounding US-Iran peace talks continues to support safe-haven demand for the US Dollar. While US President Donald Trump said on Thursday that he expected the conflict with Iran to end soon, reports of potential attacks by Iran-backed groups in the region have raised concerns about a broader escalation.

Meanwhile, reports that Iran is reviewing a framework for managing the Strait of Hormuz have further clouded hopes of a diplomatic resolution.

Attention now turns to the US Nonfarm Payrolls (NFP) report, with traders likely to remain cautious ahead of the release rather than establish fresh directional positions. The employment data could significantly influence expectations for the Fed’s policy path and trigger further moves in the US Dollar and Gold.

Oil prices extended their gains early on Friday as uncertainty over the reopening of the Strait of Hormuz intensified after Iran, in coordination with Oman, considered restrictions on vessels deemed hostile and potential penalties for ships violating the proposed rules.

Both benchmarks surged on Thursday after Iran began reviewing a proposal that could restrict US and Israeli vessels from using the Strait of Hormuz, a key energy corridor through which around one-fifth of global oil and liquefied natural gas flows.

The latest developments have revived concerns that the conflict between Iran and the United States remains unresolved.

Meanwhile, Yemen’s Houthis claimed responsibility for missile and drone attacks on what they described as Saudi deployments in Marib and Hadramout on Thursday.

US President Donald Trump, however, said he believed the war would end soon, keeping hopes of a diplomatic resolution alive despite the renewed uncertainty surrounding the Strait of Hormuz.

US stocks closed lower on Thursday as a sharp rebound in oil prices and higher Treasury yields weighed on sentiment ahead of Friday’s closely watched Nonfarm Payrolls (NFP) report. The technology sector managed a modest gain, but concerns over stretched valuations in the artificial intelligence trade limited the broader advance.

Technology stocks remained in focus after a strong start to August, although renewed concerns over the sustainability of the AI-driven rally limited gains. SanDisk and Western Digital dropped despite beating quarterly expectations, as their forward guidance failed to match elevated market expectations. Alphabet also declined ahead of a reported $25 billion bond offering aimed at funding its ongoing AI infrastructure investments.

Meanwhile, SpaceX rebounded 6% after falling sharply in the previous session following its first public quarterly results. The shares recovered despite the release of around 911.5 million shares from insider lock-up agreements.

Attention now turns to Friday’s US Nonfarm Payrolls report following a mixed set of labor-market indicators this week. US job openings increased less than expected in June, while private-sector employment growth also slowed in July. Initial jobless claims, however, remained below 200,000 for a third consecutive week, pointing to continued resilience in the labor market.