Price stability as markets await US non farm payrolls data tomorrow

The FX markets have seen a slight uplift in volatility in Asia following on from better US data that gave the dollar a boost as the market finally looks past weather distortions. The ADP report showed a gain of 191k in private non-farm payrolls in March, which was close to the 195k consensus forecast. It was the revision last month from 139k to 178k, however, that signalled the move as NFP forecasts were revised higher. Most are now looking for 225k+ on Friday.

The Asia session has seen the commonwealth currencies trade under pressure following data from Australia and China. Australian retail sales disappointed at 0.2% for the month of February, versus the 0.3% expected. The official Chinese non-manufacturing PMI data for March came in at 54.5 versus 55 in February, with the HSBC service PMI reading showing a slight positive, up 0.9 on the month to 51.9.

Sterling saw a rare move in the overnight session as the market focused on a media report in The Northern Echo. The BoE Governor has said that there could be an interest rate increase in the UK before the next General Election (scheduled May 2015), although he did state that any increases would be ‘gradual’ despite the fact that the UK economy is growing faster than any other developed nation.

This morning will see the release of service sector PMI data from Europe and the UK, with the latter always used as a growth gauge. The main event today will no doubt be the ECB meeting and the subsequent press conference as IMF Chief Christine Lagarde suggests more easing is needed in the EU and that unconventional measures are now required. The market has very little action priced into the meeting following ECB Mario Draghi’s hawkish press conference last month, with ECB members Wiedmann and Constancio echoing these comments in the last few days that inflation pressures will start to build again in the coming months. Eurozone inflation has now been below 1% for the past six months, which surely must be getting very concerning, especially with the ECB mandate always being ‘price stability’.

EUR/USD

Supports 1.3750-1.3705-1.3685 | Resistance 1.3820-1.3880-1.3965

USD/JPY

Supports 103.70-103.40-102.80 | Resistance 104.20-104.85-105.00

GBP/USD

Supports 1.6620-1.6590-1.6540 | Resistance 1.6685-1.6720-1.6750