Forex Today: January Nonfarm Payrolls data to trigger next big market reaction

Here is what you need to know on Friday, February 7:

The trading action in financial markets turns subdued early Friday as investors move to the sidelines ahead of key macroeconomic data releases. The US Bureau of Labor Statistics will publish January employment report, which will feature Nonfarm Payrolls, Unemployment Rate and wage inflation figures. Labor market data from Canada and comments from central bank officials will also be watched closely by participants.

The US Dollar (USD) Index closed marginally higher on Thursday, supported by the cautious market stance. In the European morning on Friday, the index fluctuates in a narrow range below 108.00. Nonfarm Payrolls in the US are forecast to rise by 170,000 and the Unemployment Rate is seen holding steady at 4.1% in January.

Mexico's central bank, the Banco de Mexico (Banxico), announced late Thursday that it lowered interest rates by 50 basis points (bps), as anticipated. The decision, however, was not unanimous as Deputy Governor Jonathan Heath voted for a 25 bps rate cut. USD/MXN edged lower and closed in negative territory on Thursday before stabilizing slightly above 20.45 on Friday.

EUR/USD snapped a three-day winning streak on Thursday, pressured by the broad USD resilience. Early Friday, the pair trades sideways below 1.0400. European Central Bank Vice President Luis de Guindos is scheduled to speak later in the European session.

The Bank of England lowered the policy rate by 25 bps to 4.5% after the February meeting, in a widely expected decision. Policymakers voted 7-2 in favor of the 25 bps cut. External Monetary Policy Committee (MPC) members Dhingra and Mann voted to cut rates by 50 bps. In the post-meeting press conference, "we expect to be able to cut bank rate further but we will have to judge meeting by meeting how far and how fast," BoE Governor Andrew Bailey said. GBP/USD lost more than 0.5% on Thursday but managed to stabilize above 1.2400 early Friday.

Nada Choueiri, Deputy Director of the International Monetary Fund's (IMF) Asia-Pacific Department and its mission chief for Japan, said on Friday that the Bank of Japan (BoJ) is likely to raise interest rates again this year. USD/JPY extended its weekly slide and touched its lowest level in nearly two months near 151.00 in the Asian session on Friday. The pair stages a rebound in the European morning and trades in positive territory above 151.50.

USD/CAD fluctuated in a narrow channel on Thursday and closed the day virtually unchanged. The pair struggles to find direction early Friday and moves up and down in a tight range above 1.4300. The Unemployment Rate in Canada is forecast to tick up to 6.8% from 6.7%.

Gold corrected lower on Thursday following a five-day rally that saw the price hit a record-high above $2,880 on Wednesday. XAU/USD stays relatively calm early Friday and trades near $2,860.