GBP/USD continues its recent gains strong above the 1.7100 handle

EUR/USD

Once again today was a rather sombre affair from the Eurozone with a lack of notable economic commentary or tier 1 data with participants looking ahead to tomorrow’s ECB rate decision and press conference. EUR/USD traded in a relatively rangebound manner ahead of today’s ADP employment reading whilst remaining south of the 1.3700 handle after briefly moving above its 200DMA at 1.3685 and being led lower by EUR/GBP which extended its recent losses following UK data. Today’s ADP report far exceeded expectations of 205k by coming in at 281k and crucially ahead of tomorrow’s nonfarm payrolls report and thus saw USD benefit at the expense of EUR and moved the pair back below the 1.3650 level. Price action then continued to remain subdued for the remainder of the afternoon as participants anticipate tomorrow’s slew of key risk events including the ECB rate decision and press conference, US nonfarm payrolls, trade balance and weekly jobs report. In terms of expectations for tomorrow’s ECB release, rates are expected to be kept on hold with focus to be placed on any further details on the recently announced TLTRO operations and the ECB’s attempt to quell market angst surrounding potential deflation. 

GBP/USD

After the pair printed its highest level since October 2008 yesterday following the better than expected UK manufacturing PMI, focus for the pair was placed on today’s construction PMI release. The release one again provided another strong data point for the UK coming in at 62.6 vs. Exp. 59.8 and showing it’s highest since reading February 2014. This consequently led GBP/USD to continue its recent gains as it held strong above the 1.7100 handle. However, these gains were consequently pared by the particularly strong ADP release. Tomorrow sees a further release from the UK in the form of services PMI which is expected to fall from 58.6 to 58, but there may be potential for this release to be overshadowed by the slew of key risk events tomorrow. 

USD/JPY

USD/JPY moved higher overnight following JPY weakness as risk appetite in the region increased after yesterday’s record highs seen on Wall Street which led to gains for Asia-Pacific equities. Although these gains were largely pared throughout the first half of European trade as the pair failed to hold on to its gains above the 101.50 level. The main driver for the session came in the form of the ADP release which consequently saw USD surge against JPY and lead the pair back above 101.50 to find resistance at the 200DMA located at 101.75. Looking ahead, with an absence of tier 1 data or BoJ speakers tomorrow, all eyes for the pair will be placed upon the US jobs report with the headline expected at 205k, although given today’s ADP reading some analysts are speculating over a 300k+ number.