If US NFP follows the ADP release, USD weakness will likely prevail

Yesterday’s market action

In Europe we saw European stocks lift from the morning lows, with ESTOXX rebounding around the 3600 handle and hold onto some of their gains into the afternoon, even with the S&P 500 dipping lower on the back of misses to ADP employment. The S&P held onto its gains from the morning session initially but fell after cash open with the weight of larger volume driving price back lower. US data sets from yesterday generally underperformed with ISM prices up from their lows but still at abysmal lows. We saw a brief glimmer of bullishness with the Final March Manufacturing PMI but it remains the market’s priority to focus on the employment figures. As the majority of traders and market participants will not be trading tomorrow’s Non-Farm Payrolls’ releases and a lacklustre print from the ADP report yesterday has the dollar strength play on the back foot. Heading into the weekend we have a split on opinions with many analysts calling for dollar strength on the back of a higher surprise print but also calls for weakness as the number will follow the barometer.

We saw a lift in Crude Oil on the release of the Department of Energy’s supply release showing a build in stocks but a large drawdown in gasoline. The supply data from the gasoline number was mentioned yesterday although the scale of the drop was not foreseen. This, coupled with news that the US’ nuclear talks with Iran have been put on hold as the March end deadline was extended and surpassed, allowed Crude to remain higher and break through significant levels to the upside, retaking the $50bbl handle overnight and retesting it this morning. This morning saw the release of UK Construction PMI printing lower than the average estimate. This allowed for a test of the 1.4800 handle before breaking lower later in the morning.

Today’s View

Ahead today we have a plethora of data-releases ahead of the long weekend. Beginning we have Challenger Job Cuts, followed by Initial Jobless Claims, Continuing Claims, February’s trade balance, ISM New York and Factory Orders. Breathe. We also have the ECB’s minutes from the March meeting which are unlikely to yield any further interest as monetary policy language is likely to remain unchanged. With regards to Jobless Claims, we are expecting a sub-300k print at 287k. As usual we target a number below the 300k yard-stick and anything greater than 300k will more than likely spur further weakening into the weekend as traders get jittery around the NFP release.