As we have promised, trading currencies have become more interesting following the interest rate decisions in Europe. The next 24 hours should prove to be just as exciting for forex traders with the February non-farm payrolls report due for release. The US dollar has rallied significantly ahead of the payrolls report, which is traditionally the single most market moving economic data for the EUR/USD. The cohesive rally in the US dollar and the price of gold along with the sell-off in US equities indicate that risk aversion is the main theme of the day. This also provides a clue on how the dollar could trade following Friday’s non-farm payrolls report (February Non-Farm Payrolls Preview).

There is no question that the US labor market is very weak with job losses expected to extend for the 14th consecutive month. If February non-farm payrolls exceed -450k, then more than 4 million Americans would have lost their jobs since January 2008. The current forecasts for non-farm payrolls are far more pessimistic with analysts predicting a decline of 650k jobs. The US dollar has rallied as risk aversion drags down the higher yielding currency pairs, but if non-farm payrolls surprise to the upside and we that think it will, the dollar may give back some its spectacular gains.