Traders Brace for Volatility as Nonfarm Payrolls Report Approaches

EUR/USD is trading in a negative territory for a sixth consecutive session as investors remain cautious ahead of the highly anticipated US Nonfarm Payrolls (NFP) report. The data is expected to provide fresh clues on the strength of the US labor market and the Federal Reserve’s policy direction. December payroll growth is forecast at 60,000 jobs, slightly below November’s 64,000 increase.

Downside risks for the pair persist as the US Dollar continues to draw support from recent labor market indicators. On Thursday, data from the US Department of Labor showed Initial Jobless Claims rising modestly to 208,000 for the week ending January 3, marginally below market expectations but higher than the previous week’s revised 200,000. Meanwhile, Continuing Claims climbed to 1.914 million from 1.858 million, pointing to a gradual increase in the number of Americans remaining on unemployment benefits.

In the Eurozone, economic sentiment data offered mixed signals. The European Commission’s Business Climate Index improved to -0.56 in December from -0.66, suggesting tentative stabilization in business conditions. Consumer Confidence also strengthened to -13.1 from -14.6, although the Economic Sentiment Indicator slipped slightly to 96.7 from 97.1.

European Central Bank Vice President Luis de Guindos said the current level of interest rates remains “appropriate,” noting that inflation has returned to target, though uncertainty surrounding the outlook remains elevated.

Bitcoin traded steadily during Asian hours on Friday, after its early-year rebound lost momentum this week. Investor attention remains firmly fixed on the upcoming US Nonfarm Payrolls report, which is expected to provide further clarity on the outlook for US interest rates.

Broader caution also weighed on the crypto market, as elevated geopolitical tensions globally dampened appetite for risk-sensitive assets. As a result, price action across digital assets remained subdued.

Markets remained uneasy following uncertainty surrounding Washington’s stance on Venezuela, after US forces captured Venezuelan President Nicolas Maduro during a weekend operation.

Geopolitical frictions in Asia also weighed on risk sentiment. Tensions between China and Japan escalated after Beijing announced potential economic restrictions against Tokyo. Relations were further strained by ongoing disputes linked to late-2025 remarks from Japanese Prime Minister Sanae Takaichi regarding potential military involvement in Taiwan.

Heightened market caution was also reflected in US-listed spot Bitcoin exchange-traded funds, which recorded a third consecutive day of significant outflows.

Elsewhere in the crypto market, prices remained range-bound on Friday as traders awaited the US payrolls release. December’s employment report is expected later in the session and is widely seen as a key input for longer-term interest rate expectations.

Oil prices rose during Asian trading on Friday, extending a strong rebound from the previous session as concerns mounted over potential supply disruptions stemming from geopolitical tensions involving Russia and Iran.

Sentiment was further supported by easing fears of an immediate surge in Venezuelan oil supplies. On Thursday, the US Senate voted to advance a resolution that would restrict President Donald Trump from launching additional military action against Venezuela without congressional approval.

Oil prices added modestly to gains following upbeat inflation data from China, the world’s largest crude importer, which suggested that the country’s economic recovery is beginning to gain traction. However, further upside was limited as traders remained cautious ahead of the US Nonfarm Payrolls report later on Friday, a key input for interest rate expectations.

Concerns over potential supply disruptions in Russia and the Middle East continued to underpin oil prices this week.

Fighting between Russia and Ukraine persisted with little sign of progress toward a ceasefire. Market attention was drawn to a drone attack on a tanker bound for Russia in the Black Sea, which raised fears of renewed disruptions to Russian crude exports.

Adding to supply concerns, reports earlier in the week suggested that President Trump is prepared to allow a bipartisan bill proposing tighter restrictions on countries conducting business with Russia, as part of ongoing efforts to pressure Moscow into ending the conflict.

US equity markets closed mixed on Thursday in largely directionless trade, as the recent rally in semiconductor stocks cooled. Strength in cyclical sectors, particularly consumer discretionary and energy, helped limit broader market declines, with investors remaining cautious ahead of Friday’s closely watched monthly jobs report.

Technology stocks lost momentum after a strong start to the year, with memory-chip makers coming under renewed pressure. Shares of Western Digital, SanDisk, Seagate Technology, and Micron Technology all declined sharply, adding to weakness in the broader semiconductor space. NVIDIA also weighed on the sector, falling about 2%.

In contrast, consumer-related stocks provided support to the broader market. Amazon and Costco advanced, with Costco extending gains after reporting stronger December sales compared with the same period last year.

Economic data released Thursday showed a modest increase in new unemployment claims, suggesting layoffs remained relatively subdued toward the end of 2025, even as overall labor demand softened.

Initial jobless claims rose by 8,000 to a seasonally adjusted 208,000 for the week ending December 27.

Meanwhile, US labor productivity surged at its fastest pace in two years during the third quarter. The Bureau of Labor Statistics reported productivity growth of 4.9% on an annualized basis, marking the strongest performance since the third quarter of 2023 and following an upwardly revised 4.1% increase in the prior quarter.

Market attention now turns to Friday’s nonfarm payrolls release, which is expected to offer clearer insight into employment trends and wage pressures. The report will be closely scrutinized for signals on the timing and scale of potential Federal Reserve interest rate cuts.