Market Jitters ahead of US Job Report

Weak macro data in Asia sent equity markets lower and this has been mirrored so far in the European session. Although Chinese PMI came out better than expected at 50.2 and showing an expansion in the sector for the first time in eight months, Japanese Tankan fell more than expected which outweighed the positive Chinese PMI. The US Dollar continued to depreciate against peers and the drop in WTI Crude has also put a soft tone to the Canadian Dollar, but USDCAD is still well anchored below the 200-DMA and we still prefer the downside.

This morning EUR-pairs have been boosted by solid March PMI Manufacturing whereas GBP-pairs dropped a tad on back of a lower than expected figure. EURUSD has been pushing higher ahead of the US Job Report at 14:30CET, and is currently close to testing the 76.4% Fibo retracement level at 1.1430.

Following the ADP report on Wednesday (a proxy for the nonfarm payrolls figure), consensus among market participants is a figure of 205k vs. 242k in February. The unemployment rate is expected to be unchanged at 4.9% while the Average Hourly Earnings are expected to show a 0.2% increase. The problem for the Fed is the fact that the improvement of the US labour market has not materialised into increased growth and that’s why the Fed is still in a dilemma. Growth projections have been downgraded recently (biggest jump announced from the Atlanta Fed, which now has downgraded their Q1 growth to 0.6% from 2.3% earlier).

Later today, at 16:00CET, US ISM Manufacturing PMI will be released, where markets expect a figure of 50.7 compared to 49.5 in Feb. In addition, we have the Consumer Sentiment from Michigan, expected to increase to 80.5 vs. 80.0 prior.  Should we see strong figures, we expect the USD to appreciate across the board and recover some of the losses which the Greenback has experienced since the FOMC in mid-March. However, we are still overall negative on the US Dollar.

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