Raphael Sonabend, FX Analyst
Draghi’s optimism saw volatility throughout euro markets as Eurozone growth and CPI forecasts were revised up across the board and he announced that QE is ready to go with no changes being made to their initial plan. Whilst he warned that low, negative inflation figures will be seen this year, the ECB predicted that a rise would begin in late-2015 and the 2% goal is within reach. Euro strength was seen during Draghi’s speech however these failed to hold and counterparts quickly recovered lost ground. Today’s focus will be on the much-awaited US employment figures at 13:30. Non-farm employment change is predicted to fall slightly but so is the unemployment rate; mixed figures could bring some volatility. Recent confidence in the dollar suggests that traders will focus on whichever figure registers as stronger and greenback strength could continue.
GBP/EUR: Currently trading at 1.3820
- Heavy volatility was seen yesterday during the ECB conference in which Draghi readied the Eurozone for the start of quantitative easing and announced the inflation target is within reach. Eurozone forecasts were revised upwards with growth increased from 1% to 1.5% and set to hit 2.1% in 2017 whilst inflation is set to fall before late-2015 until it rises to 1.8% in 2017. The day closed with Sterling having recovered all lost ground.
- No data out of either country today will allow traders to digest yesterday’s news. Slight euro gains have been made in this morning’s session but Sterling resistance is likely to continue.
GBP/USD: Currently trading at 1.5216
- Dollar gains continued yesterday in anticipation of today’s non-farms payroll data. US unemployment saw a rise to 320K from 313K but employment data was overshadowed by the speculation surrounding today’s release.
- US data in focus today with non-farm employment change and unemployment rate figures both due. Non-farm employment change is forecast to fall from 257K to 240K whilst the unemployment rate is predicted to fall to 5.6%. After rumours that the figures will be stronger than forecast, poor data could see a Sterling recovery in today’s session.
EUR/USD: Currently trading at 1.1002
- Euro volatility was seen again in this pair as a spike to 1.1114 was quickly reversed back down below 1.099. Whilst Draghi spoke with confidence and optimism, forward-looking traders clearly chose to favour ‘safer’ investments, this trend is likely to continue until Eurozone data is consistently strong.
- EUR/USD traders will turn their attention to US employment change figures this afternoon. Recent bullish sentiment in favour of the greenback could be reversed if figures come out below expectations.
GBP/AUD: Currently trading at 1.9490
- Sterling gains pushed up throughout the day, peaking at 1.963 before the Aussie resisted further losses. As the Aussie is so heavily influenced by US data, AUD strength may have been supported by the optimism that is surrounding US non-farms data.
- With no data due from either side of this pairing, this pair will be US-data dependent. The unemployment figures this afternoon are forecast to be mixed, with falls in both unemployment rate and employment change.
GBP/NZD: Currently trading at 2.0388
- A quiet day from both countries yesterday saw the Sterling gain on the Kiwi throughout the day. As this pair broke the 2.035 support level two days ago and fell to 2.005, Sterling reversed these recent Kiwi gains and pushed the rate back towards 2.039.
- Pound strength could continue as no data is due until Wednesday’s RBNZ rate statement. The possibility of further Kiwi gains remains if US employment data this afternoon is strong.
GBP/CAD: Currently trading at 1.8985
- After the Bank of England announced rates would be remaining at 0.5%, the pound gained against the Loonie until the 1.906 mark was broken. Canada’s Ivey PMI figures exceeded expectations and hit 49.7, close to the neutral 50.0 mark but a contraction nonetheless and the Loonie continued to weaken.
- CAD strength has been seen this morning despite poor figures forecast for this afternoon’s Canadian data. Building permits is forecast to fall from 7.7% to -4.2% whilst the trade balance is predicted to fall to -0.9B from -0.6B.
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