Euro sells off on ECB announcement ahead of US non farm payrolls report

The FX markets are consolidating at New York closing levels following the ECB sell off in the euro despite an unchanged outcome to policy. ECB President Mario Draghi stepped up the rhetoric on the quest to fight the threat of deflation. ‘The Governing Council is unanimous in its commitments to using unconventional instruments within its mandate in order to cope effectively with the risks of a too prolonged period of low inflation.” The price stability mandate and credibility of the ECB is now the key for me. Macroeconomic projections still have the HICP inflation expectation at 1% for the second quarter, which means the next HICP release on April 30^th needs to rebound from the 0.5% level in March to at least 0.8% to achieve the expected quarterly target and adhere to the mandate of price stability. A miss followed by an unchanged policy decision at the next meeting on the May 8^th will surely have credibility consequences.

The Asia session has been lacking in volatility ahead of the US jobs report this afternoon, with the only news overnight pushing USD/CNH just shy of the 6.22 level as Shanghai Securities News reported that soaring bad loans at Chinese banks are worrying local regulators who are subsequently now planning stress tests on the financial institutions to gauge the impact of the “unfavourable situations”.

Today will of course be all about the US jobs report as the market looks for a clean, robust and non-weather distorted release and the expectations are high! The consensus is for a 200k increase in both non-farm and private payrolls with the unemployment rate expected to decline to 6.6%.

EUR/USD

Supports 1.3680-1.3645-1.3580 | Resistance 1.3750-1.3830-1.3875

USD/JPY

Supports 103.50-103.10-102.65 | Resistance 104.20-104.80-105.00

GBP/USD

Supports 1.6570-1.6540-1.6480 | Resistance 1.6665-1.6720-1.6750