Forex Today: US Dollar continues to retreat ahead of key employment data

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

The US Dollar (USD) Index continues to edge lower on Friday and remains on track to post its largest weekly loss since November 2022. In the second half of the day, February employment data from the US, which will feature Nonfarm Payrolls, Unemployment Rate and wage inflation figures, will be watched closely by market participants. 

After suffering heavy losses against its major rivals in the first half of the week, the USD continues to weaken, albeit at a softer pace. Markets expect Nonfarm Payrolls to rise by 160,000 in February, following the 143,000 increase recorded in January. Later in the American session, Federal Reserve (Fed) Chairman Jerome Powell, as well as some other policymakers, will be delivering speeches before the Fed's blackout period starts on Saturday. At the time of press, the USD Index was fluctuating in negative territory below 104.00, losing about 3.4% on a weekly basis.

During the Asian trading hours, the data from China showed Exports rose by 2.3% on a yearly basis in February, while Imports declined by 8.4% in the same period. In turn, China's trade surplus widened to $170.51 billion from $104.84 billion in January. AUD/USD stays on the back foot early Friday and trades near 0.6300.

The European Central Bank (ECB) announced on Thursday that it lowered key rates by 25 basis points (bps), as expected. In the policy statement, the ECB reiterated that future interest rate decisions will be based on the assessment of inflation outlook in light of incoming economic and financial data, dynamics of underlying inflation, and strength of monetary policy transmission. Commenting on the policy outlook, ECB President Christine Lagarde noted that the ECB will remain data-dependent and that they will make decisions on a meeting-by-meeting basis. EUR/USD closed marginally lower on Thursday but started to edge higher above 1.0800 early Friday. Meanwhile, the data from Germany showed that Factory Orders contracted by 7% on a monthly basis in January.

Statistics Canada will publish February jobs data later in the day. Investors expect the Unemployment Rate to tick up to 6.7% from 6.6% in January. After posting losses for three consecutive days, USD/CAD stays in a consolidation phase at around 1.4300 in the European morning on Friday.

GBP/USD fluctuates in a tight channel at around 1.2900 on Friday after setting a multi-month above 1.2920 on Thursday.

USD/JPY stays under bearish pressure on Friday and declined toward 147.50. Japan's Finance Minister, Katsunobu Kato, said early Friday that there have been one-sided and rapid market moves, adding that he will take appropriate action against excessive foreign exchange moves.

After reclaiming $2,900 earlier in the week, Gold struggled to preserve its bullish momentum and registered small losses on Thursday. In the European morning on Friday, XAU/USD moves sideways at around $2,910.