GBP/EUR 1.2083 (0.8276)
The Headline NFP figure on Friday came in at 192k, a good reading based on previous months and just marginally below the 200k expected, however this figure did not help the USD rally. The headline figure below expectations and unemployment rising back to 6.7% saw some USD selling on reaction to the figure. Stocks fell with the Nasdaq declining by the most in two months. This tone continued through the weekend and overnight we saw Asian equities falling. EURUSD, EURGBP and GBPUSD were little changed from Friday morning but the USD has been lower against EM currencies so far.
While the headline figure from Friday’s Non Farms was marginally below what was expected there was also notable revisions to Jan and Feb data, up 37k jobs combined. It is hoped that these reading have signalled an end to the poor weather effect on the labour market, and the return to more normalised labour growth should see the Fed continue with their current pace of tapering.
The economic calendar is relatively quiet today with the bulk of data already released in the form of German industrial production and Swiss CPI figures. German industrial production grew marginally more than expected through February, at .4% vs .3% expected, however the year on year figure was still down from 4.9% to 4.8%. The Euro is slightly firmer this morning since the German data but follow through is likely to remain limited given its impact on ECB policy.
The release of the ECB Annual Report is likely to get more attention given the potential implications on policy outlook. Last week’s ECB meeting saw a slight change in rhetoric from the ECB and should disinflation continue to be an issue for the region, the central bank will have to expand its monetary stimulus. Any further indication on potential action or triggers should put the EUR under some further pressure but for now EURUSD continues to be well supported at 1.3700.
The US session is light today but we do have the Fed’s Bullard due to speak on monetary policy in LA. In fact for much of the week the US data flow is relatively light so we will be left to Fed speakers to gauge the continued appetite for scaling back Fed easing.
EURGBP remains firmly supported at .8250 having failed to break lower on several attempts over the last two weeks, this increases the potential for a move back higher, but with potential ECB action in the coming months this pair is likely to remain range bound. .8400 acts as firm resistance but ahead of that .8310 should hold weaker attempts higher.
EURUSD as mentioned remains well supported around the 1.3700 area. This area has previously supported EURUSD through February and March and again it appears we need a firmer driver to break lower. It was hoped that Friday Jobs data would be the catalyst but for now we wait. Any move higher should be well held ahead of 1.3800.
GBPUSD is similarly well supported between 1.6550 to 1.6570. UK data was not exactly supportive of a stronger GBP over the last couple of weeks but the greenback has failed to really drive the pair lower. For now it remains in limbo and unless we see a significant change in UK Gilts rates this pair is likely to remain sideways between 1.6550 and 1.6750.