British Pound (GBP) Lifted by Stronger PMI Services

USD: Counting Down to Non-Farm Payrolls
USD/JPY – Aiming for 100
CAD – Employment, Trade and IVEY
AUD – Shrugs off Stronger PMI, Retail Sales
NZD – Oil down another 1%

Services PMI was better than expected rising to the highest level since August last year. This provided some support for GBP yesterday. There is little on the UK calendar today. But GBP/USD looks likely to get dragged by EUR/USD, the 1.5250/70 area should provide resistance on the topside for GBP/USD.

EUR came under pressure following downward revisions to Eurozone Services PMIs, but EUR/USD was further weighed by Draghi’s opening statement at the ECB press conference. The statement had a dovish tone similar to last month, but there was also some indication that the ECB were ready to act to support the economy if necessary. However his comments on Cyprus saw EUR/USD rebound, calming market concerns that the bailout was not a template. German Factory orders is expected to rebound in February, offsetting the sharp drop seen the previous month, Eurozone Retail sales could also see some interest but EUR/USD broke above the 200-day moving average yesterday, but there is little reason to be bullish EUR and Lloyds TSB think a move beyond the 1.30 will be difficult.

US Payrolls this afternoon is the main focus for today. The market is expecting headline payrolls to rise by 190k, a slight downward revision to market expectations since the weaker ADP employment report earlier this week. The employment rate will also be of interest with the measure being a focus for the Federal reserve monetary policy. The USD will likely continue to benefit from better US data.

Yesterday’s Bank of Japan meeting under a new governor confirmed a significant easing in monetary policy. Effectively purchasing over 7 trillion yen on a monthly basis, aimed at doubling the monetary base over a two-year horizon. In contrast, central bank meetings in the UK and euro area heralded no change in policy. Nevertheless, in both these cases there is still a growing need for further stimulus over the coming quarters.

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