Dollar up on strong data as traders await non farm payrolls tomorrow

The FX markets are using possibly the first FX analogy I heard back in 1989 when I started as a position keeper in the FX market. ‘Buy dollars wear diamonds’ was used to describe an outperforming US economic picture. Following yesterday’s US data and policy releases I can’t argue!

Yesterday the ADP survey was first up and revealed a slight miss to the downside, coming in at 218k versus expectations of 230k. The market still took this as a generally strong report as we moved swiftly onto the GDP data which came in at a whopping 4% for the quarter, with previous estimates also being revised higher. The dollar rallied across the board as the DXY broke the November high and triple top of 81.50. The FOMC produced few surprises with the below being what I consider changes to the previous statement.

• Plosser dissents on decision, citing guidance on rate outlook doesn’t like the term ‘considerable time’
• FOMC sees significant underutilisation of labuor resources
• FOMC: odds of persistent sub-2% inflation ‘diminished somewhat’

The emerging markets picture is likely to remain clouded this morning after last minute talks between Argentina and creditors collapsed late on Wednesday evening, with ratings agency Standard and Poor’s declaring Argentina in default.

Overnight data releases have placed the proud pound under pressure as the GfK consumer confidence survey came in at -2 versus +2 expectations. The Nationwide house price index is rising less than expected as initiatives from the BoE to curb the UK housing boom start to take effect. The AUD also remained under pressure as Australian building approvals came in at -5% on the month versus the expectations of a flat reading.

The data highlight today will be the HICP reading from Europe this morning as the market looks to see if the ECB’s initiatives have done anything to curb disinflation concerns. Weekly jobless claims from across the pond are likely to give us further guidance about the non-farm payrolls data released tomorrow.

EUR/USD

Supports 1.3365-1.3315-1.3295 | Resistance 1.3415-1.3470-1.3520

USD/JPY

Supports 102.50-102.15-101.80 | Resistance 103.10-103.40-103.65

GBP/USD

Supports 1.6880-1.6850-1.6740 | Resistance 1.6935-1.6960-1.7000