The European morning session saw little in the way of impactful news or data releases. European Central Bank members were active, discussing inflation and a soft landing but offered no new forward guidance, maintaining the expectation of at least one more rate cut.

Bloomberg reported that the Bank of Japan might reduce its bond-buying efforts less than anticipated, which would typically weaken the yen. However, the market response was muted. Traders are largely focused on the upcoming US NFP report and are maintaining a calm stance.

Musk and Trump Disagreement

There was a brief market disruption due to a disagreement between Musk and Trump, but normalcy returned after Trump indicated progress in their relationship. Reports suggest that White House aides plan to facilitate a call on Friday with Musk, although sources denied any such plans were finalized.

In the upcoming American session, attention will be on Canadian Employment data and the US NFP report. Additionally, possible news regarding Musk and Trump could influence market dynamics. As of now, US equities and bitcoin are rebounding from prior losses.

What we’ve seen so far in the European session has been light on developments that would normally stir the markets. Policymakers from the European Central Bank did provide their thoughts on the current inflation picture and the path for rate adjustments, but without indicating any decisive change in their stance. They’re still on track for at least one more rate cut, though the timing remains data-dependent. That lack of new information has kept euro rates and broad positioning fairly steady for now.

Meanwhile, across Asia, reports from Bloomberg suggested that Japan’s central bank may scale back its bond purchases, but not as sharply as some had expected. Under normal circumstances, this kind of move would weigh on the Japanese yen since it implies continued dovishness. And yet, price action stayed very subdued. That tells us markets may have already priced in a slower reduction in policy support, and traders are holding back from fresh positions ahead of the heavy US numbers coming later. In that sense, it’s not a surprise that yen crosses haven’t responded with a typical directional move.

Anticipation Around NFP

News out of the US had briefly disrupted sentiment during European hours, tied to rumblings around a disagreement between Trump and Musk. While it was quickly resolved with reports of improving dialogue between the two, it’s a reminder that narratives outside traditional economic indicators can catch markets off-guard, especially when they involve high-profile figures. Some sources initially claimed a discussion was being lined up for Friday involving White House aides and Musk, although others countered that nothing had been confirmed.

Now, everyone’s eye turns squarely to the afternoon slate. The US non-farm payrolls report will likely serve as the primary trigger for price shifts. Alongside it, Canada’s employment figures could cause shorter-term volatility in CAD-related pairs, particularly if we see a surprise one way or the other. Both of these datasets feed into how we model interest rate projections, and more precisely, the trajectory for central bank responses on either side of the border.

At the same time, equity markets are attempting to regain their footing, with US indices and crypto benchmarks like bitcoin climbing higher into the early American session. That movement could reflect a sense of positioning adjustment before the data lands, or even some speculative buying into rising risk sentiment. Either way, traders with exposure to rates or volatility products will need to pay close attention.

What we’ve learned this morning is that even in quieter conditions, movements tied to individuals or small shifts in communication strategy can still generate market hiccups. When framed alongside the anticipation around NFP and the broader macro picture, it underscores the benefit of remaining flexible at intraday horizons.

We’ve held a neutral bias so far until the data provides fresh input, and that seems to mirror broader market action.

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