EURUSD slides on ECB support package NFP up next

Dovish Draghi did it again. Over the past 15 months the euro has fallen after every ECB meeting. Today was no different. The ECB substantially revising down growth projections, whilst unveiling measures to revive the bloc’s ailing economy, and pledging to keep rates on hold until 2020, hit the euro hard. 

The ECB outlook downgrades:

• 2019 inflation outlook to 1.2% vs 1.6% 
• 2019 GDP outlook to 1.1% vs. 1.7%
• 2020 inflation outlook to 1.5% vs 1.7%
• 2020 GDP outlook to 1.6% vs. 1.7%

Whilst a dovish Draghi was broadly expected, the ECB President caught the markets off guard with the launching of a fresh round of LRTO’s just three months after the conclusion of the QE programme. Perhaps the only ray of light among the darkening clouds was Draghi seeing the risk of recession as low even though the risks to the economy are tilted to the downside.

Euro traders found little to cheer from Draghi’s appearance. The euro, which had lost 1% versus the dollar across the week, extended those losses during Draghi’s press conference, dropping to a 4-month low of €1.1241. 

Can the US labour market continue to defy slowing global growth trends?

The euros ability to claw back today's losses will depend largely on what the non-farm payroll has in store. 

NFP expectations for February:

• 180,000 jobs created vs. 306,000 in January
• Unemployment 3.9% vs. 4% in January
• Average hourly earnings +0.3% vs. +0.1% January. 
• Annual average earning +3.3% vs. 3.2% January

Whilst concerns over the state of the global economy have weighed on sentiment in recent sessions, the US economy has so far defied doomsayers and continues along a steady pat of growth. US GDP remains strong at 2.6% in Q4 2018, US service sector activity is also booming. However, manufacturing employment ticked lower in February, whilst ADP private payrolls were also slightly below forecasts. Given the strong correlation between ADP private payrolls and NFP we could expect to see a slight miss. In such a scenario we could expect to see the EUR/USD claw back some of today's losses.