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As usual, the euro was buffeted around by the verbal gymnastics of the ECB President on Thursday. Reading between the lines, the ECB does not yet have the internal agreement on just when and what form quantitative easing should take. At the same time, inflation projections were revised lower in the coming year, with the eternal belief retain that things will return to normal on the 1-2 year horizon, the projection revised down from 1.4% to 1.3% for 2016. There were also post-meeting stories on newswires which caused more volatility later in the day, with the net result being EURUSD some 80 pips higher vs. pre-meeting levels. Elsewhere, USDJPY is struggling to sustain the move above 120, whilst AUDUSD is bumping along the lower for the year.

Naturally, the focus is on the US employment report data today at 13:30 GMT. The market expects the rate to hold steady at 5.8%, with headline payrolls seen rising 230k. As always, the initial reaction is not always sustained, dependent on market positioning and the interpretation of the overall balance of data on the employment, labour force and earnings. Earnings data is seen rising 0.2%, with the annual rate at 2.1%. This is still only just keeping pace with inflation. We would see the dollar’s sensitivity to the number reduced at this point in time, given the potential for the Fed to shift its language to signal a tightening in the coming months is pretty weak, with its preferred measure of inflation expectations having fallen to levels last seen more than 2 years ago. Note that oil prices have headed lower and are once again not that far above the lows for the year.

Further reading:

ECB Post-Mortem: We remain short EUR- BNPP

EUR/USD: Trading the US Non-Farm Employment Change