General market theme
So the Non-Farm Payrolls report is now behind us and we consider ourselves wiser about the progress of the US domestic economy and interested to see how the market will react to these figures. The report printed in a mixed manner as the number of people added to the workforce beat expectations and the unemployment rate held steady at its low levels but the average hourly earnings component declined.
We have explained how important wage growth is for the Fed and their rate hiking agenda and we believe that given these figures they will not move forward with another rate hike for now. Moving forward the attention now turns to the euro and the upcoming ECB meeting on monetary policy as fresh easing could be in the cards for the single currency.
Price action highlights
The euro was quite volatile on Friday on the back of the NFP report and especially after the way the figures printed. The initial reaction was a dollar rally that pushed the euro towards the 1.0900 area as investors were surprised by the strong number of new jobs added and the low unemployment rate but very quickly this rally was reversed. The euro hiked towards the 1.1050 level but this attempt was also reversed and the single currency ended the way where it started as investors shifted their focus on the upcoming ECB meeting and its bearish bias.
The cable was a bit more resilient on Friday and even though it pushed lower to test the 1.4100 support level when the NFP figures hit the wires the UK currency edged higher and reached the 1.4250 area. However this morning the pound is turning lower again and the 1.4200 level is threatened with the pivot point siting around the 1.4150 area. The short-term support for the cable lies at the 1.4100 level and for any reversal to pick up pace we need to see a break below this key support figure.
Focus of the day
Today the focus will turn to the euro as investors are preparing for the upcoming ECB meeting, the calendar is virtually empty of any important report other than the Sentix Investor Confidence reading this morning. A potentially higher reading will do little to change the bearish bias market participants have for the euro but we don’t expect too much volatility so early in the week.
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