Incoming economic data on the US economy unexpectedly revealed rising economic momentum in January, triggering sharp shifts in FX, gold, oil and Treasury yields. US ISM report on activity in services sector beat expectations, with broad index rising to 59.9 points (forecast 57.3 points). The new orders sub-index, the leading activity indicator, rose to 61.8 points, well above expectations. But the most important signal was the shift in employment sub-index, which jumped from 48.2 to 55.7, indicating a significant improvement in the US pace of hiring in January, suggesting that NFP report will likely surprise market to the upside on Friday.

Speaking further about the US job market, a big surprise was the ADP report released on Wednesday. The agency estimated job growth at 174,000 in January, significantly better than the consensus forecast of 49,000. In its December report, the ADP pointed to 78,000 job loss in the US economy.

It's worth noting that the US economic data for January improved significantly compared to other advanced economies such as the EU and the UK, which, as shown by retail sales data, continue to weather through setbacks caused by forced fall in consumption and restricted mobility in winter. In addition, the US was able to avoid repeated hard lockdowns that were introduced in the EU and England, so activity in services sector and consumer spending was less affected. Also, not to be forgotten is the US stimulus payment ($ 600), approved by the Congress in December, which gave significant boost to consumer spending.

On Thursday, we see some substantial shifts in the currency markets, as well as a significant reaction in gold and Treasury yields, which suggest that investors changed their view on the US economy, expecting its outperformance compared to other leading economies across the Pond. European currency and pound sterling are down 0.4% against USD at the time of writing, gold plunges 1% and is apparently ready to retest $1800 zone, the lowest level since late November 2020, the yield to maturity of 10-year Treasuries has risen to 1.13%, while its spread with 2-year bond yields extended gains, rising above 1%:

USD index & Gold reaction after ISM and ADP data releases on Wednesday