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Dollar recovers ahead of today’s much anticipated US jobs report

By Alex Edwards

The pound made solid gains vs. the greenback yesterday morning, this following the post FOMC dollar sell-off the previous evening. The pair came close to breaking fresh 4-month highs again but failed, as the USD gradually recaptured some of its losses with investors paring their positions ahead of the much-anticipated US Non-Farm Payrolls this afternoon. If the data re-affirms the more neutral direction of the Fed then the dollar could well come under further selling pressure this afternoon, reaffirmation being any print sub 150k.

Brexit headlines have been sidelined a little over the last 24 hours. Traders are waiting patiently for any signs as to who gives in first, or at least whoever gives a little first – the UK or the EU, or both, should negotiations go swimmingly.

Whilst US employment data is the immediate focus for cable traders, they’ll have half an eye on next week’s Bank of England monetary policy announcement. We’re seeing some commentary this morning suggesting they could toe a hawkish line following recent positive employment and price data, but they’re at least nailed on to leave interest rates on hold.

As mentioned above, the dollar has steadied, or recaptured some of its losses post the FOMC drop. Traders have been keen to square up their books ahead of the ever-important US jobs report today. With this in mind, the range in dollar pairs will likely be muted through the London morning unless we get any Brexit or US-China trade related surprises. On the subject of US-China trade talks, comments have been fairly positive so far, but there’s been little detail and nothing too specific for investors to get that excited about.

As well as US Non-Farm Payrolls today, we also get Average Hourly Earnings, Unemployment and ISM Manufacturing PMI from the States. It could be a volatile end to the week.

The euro slipped through the day yesterday after the ECB’s Weidmann said that German GDP would probably be “well below” 1.5% through 2019. The single currency remains on the backfoot this morning too as traders await local data by means of European Flash CPI and French and German Final Manufacturing PMIs.

The aussie dollar was sold off overnight after the release of weaker than expected China Caixin Manufacturing PMI. The data showed a big drop, from 49.7 in December to 48.3 in January. Given the close trade relations between Australia and China, any weak Chinese data print of this nature always tends to have an impact on AUD/USD.

The data also gave investors to take some profit on their long AUD trades taken earlier in the week considering the strong CPI print. All eyes now turn to US jobs data.

The Canadian dollar is a touch weaker this morning, this after being one of the strongest performing currencies through the month of January. Canada GDP printed at -0.1% yesterday, in line with market expectations, and so didn’t have too much of an impact on the CAD.

Investors now turn their attention to US jobs data, as well as Canadian Manufacturing PMI.

NZD/USD has been flat through the last 24 hours. There hasn’t been much to go on in terms of local data and so for the sake of sounding like a broken record, attentions will be fully focused on today’s Non-Farm Payrolls.