The Bank of England left asset purchases unchanged at £375bn to the surprise of some, which triggered a small GBP up move. The impact on GBP has been relatively modest so far, but the BoE decision is likely to be seen as a postponement of further QE than a cancelation, given the 6-3 vote in favour of additional asset purchases in February and recent comments from Tucker and others which suggest the discussion is ongoing. But for now, the lack of immediate easing should mean that it remains hard for GBP/USD to break significantly below 1.50; but should we see stronger US data, USD gains could threaten a move lower.
The ECB kept policy rates unchanged and with some speculating the possibility of a rate cut into the meeting this was positive for EUR. Draghi revealed rate cuts were discussed in his press conference but the prevailing consensus was to leave rates unchanged, which was slightly EUR negative, however his overall tone was less dovish than market had anticipated so EUR/USD edged higher. German Industrial production could see some interest today, but US payrolls will likely have a greater impact on EUR/USD, a positive surprise could push EUR/USD lower, but there should be some support just below 1.30.
The main focus today will be nonfarm payrolls later this afternoon. The market is expecting an increase of 165k, broadly on trend, but the better than expected ADP employment report earlier this week suggests risks are slightly to the upside. However, employment typically lags domestic growth and with the weakness of GDP in Q4, it suggests any major pick up in employment growth is unlikely. Nevertheless a better than expected number will be USD positive; the unemployment rate will also be important. The USD index is coming to some resistance around the 82.50-82.80 area.
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