At the start of the week, the euro and sterling posted solid gains amid dollar weakness and expectations of a more accommodative Federal Reserve policy path, testing local highs. However, the release of the January US employment report shifted market sentiment.

Non-farm payrolls rose by 130K versus a forecast of 66K, the unemployment rate unexpectedly fell to 4.3% (forecast: 4.4%), and average hourly earnings increased by 0.4%, exceeding previous readings. The data confirmed the resilience of the US labour market and supported the dollar, prompting a pullback in EUR/USD and GBP/USD from their recent peaks.

EUR/USD

After testing the 1.1920–1.1900 range, EUR/USD entered a moderate correction, retracing part of the gains recorded in recent weeks. The move appears largely technical, driven by profit-taking.

While dollar strength following the upbeat data has reduced expectations of imminent Fed easing, it is still premature to speak of a reversal in the medium-term trend. Market participants continue to assess the sustainability of the latest macroeconomic figures and their implications for monetary policy.

Technical analysis suggests the formation of a sideways range between 1.1830 and 1.1920. A break above the upper boundary could pave the way for a move towards 1.2000, whereas a drop below 1.1830 may deepen the correction towards 1.1770.

Key events for EUR/USD:

• Today at 13:00 (GMT+2): Germany’s headline PCSI consumer sentiment index
• Today at 15:30 (GMT+2): US initial jobless claims
• Today at 21:30 (GMT+2): Speech by Bundesbank President Joachim Nagel

GBP/USD

Following the formation of a piercing pattern on the daily chart at the end of last week, GBP/USD strengthened towards the key 1.3700–1.3720 zone. However, after the release of strong US labour market data, the pair corrected to 1.3610.

If the pair consolidates below this level over the coming sessions, a return towards last week’s lows near 1.3500 is possible. A break above resistance at 1.3720 could open the way for a renewed test of this year’s highs.

Key events for GBP/USD:

• Today at 09:00 (GMT+2): UK GDP
• Today at 09:00 (GMT+2): UK services activity index
• Today at 13:00 (GMT+2): UK headline Thomson Reuters/Ipsos PCSI consumer sentiment index

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