“Risk happens fast” is a phrase that gets thrown around markets regularly and that was the case yesterday as stocks rallied to flashes of record highs across our screens. It had been a lower start in Europe with major indices just edging up through the morning session with the exception of Spain where Banco Popular fell 17.7% following warnings the bank may need to be wound down if it fails to find a buyer. In the UK the FTSE continues to press to record highs each session, the latest highs this morning. In the US the S&P pressed to record highs as news filtered out the ADP employment report was far stronger than expected, printing 253k jobs vs 180k expected. Even despite the uproar surrounding US President Trump rejecting the Paris Accord, optimism remains firm in the US economy.
GBP continues to see its direction dictated by election bias and that’s not going to change. GBP feels like it has some downside left in it especially as pressure appears to mount on the Tories, despite still holding a comfortable lead. Construction PMI’s headline today’s calendar but given a better than expected manufacturing PMI got little change from GBP, the construction reading is unlikely to change much. EURGBP is capped around .8750 while support to the downside comes in around .8683 and .8655 area below that. GBPUSD also range bound with rallies above 1.29000 facing sellers, while 1.2830/40 area supports moves lower with larger support at 1.2775.
Today is all about the US Non-Farm payroll release. 180k jobs are expected to have been added but after yesterday’s bumper ADP employment report expectations will be to the upside of that figure. For us however, the key figure will be the average hourly earnings figures due to rise to 2.6% from 2.5%. Should this be weaker than expected then no matter what the heading NFP figures, there will be USD downside. EURUSD still holding firm around 8 month highs but is also stuck in a range between 1.1250 and 1.1112. We’d hope to see one of these extremes tested today in the post release environment, and a break of any range will normally see acceleration in the break direction.