The Dollar remained in the center of attention for traders over the past 24 hours as the US currency is attracting interest ahead of today’s NFP report however the story of the day came from elsewhere. It was the Pound and the huge drop it posted after the release of the Inflation Report that made headlines yesterday shifting the outlook of the UK currency for the rest of the year.
Analysts and traders were expecting a robust Inflation Report with comments full of confidence on the domestic economy and its prospects but instead read a lot of concerns about global growth and a revision lower of future expectations. As such this development caught traders off guard as most of them were positioned for a move towards the 1.5500 ceiling and the drop picked up momentum.
Today however the attention shifts to the Dollar as everyone is eager to find out how the US economy has fared during the last month. Expectations are set high as recent data out of the US has been encouraging and analysts expect a number above 200k added to the US workforce. We know how important today’s release is as the Fed will be basing their decision to hike rates or wait on the outcome of this and the next employment reports.
Starting our overview from the Cable, the currency dropped like a rock on the back of the BoE Inflation Report comments and although it was trading around the 1.5400 area in the morning the end of the day found the Pound trading at 1.5200 against the Dollar. We could see a continuation of this decline today, especially if the Dollar receives support from the NFP event and the next major support area is situated at the 1.5100 level.
The Euro recovered a bit yesterday and looked higher towards the 1.0900 area, the Single currency has been oversold on the back of the recent Dollar strength and took advantage of the opportunity to breathe a bit easier. The recovery has been small but it allows traders to reposition themselves ahead of today’s NFP reading and the bias for the Euro is bearish.
Between the expected strength of the Dollar and the evident weakness of the Euro on the back of ECB’s plans to increase their easing operations if needed there is only one way really for the European currency, unless a surprise comes up. The next target lies around the 1.0800 floor.
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