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USD: Payrolls seen rising 165k on the headline number, although modestly better ADP data on Wednesday probably means we’d have to see nearer the 180k area for a neutral dollar reaction.

Firmer reading would be dollar positive, further highlighting diverging trends between US and Europe.

See how to trade the NFP with EURUSD

CAD: More volatile Canadian jobs data seen correcting from 95k surge in employment seen last month, expectation for small 7.5k fall after 95k gain in previous month.   The CAD has seen some improvement has after USDCAD touched a 20-month high on Tuesday of this week.

Idea of the Day

There is every reason to expect today is going to be even more of a roller-coaster than usual for the first Friday of the month. Yes, the US employment report comes around again, but markets are likely to be more choppy than usual as many in the US take today off for the long Independence day holiday weekend.

The dollar is now that much more sensitive to the jobs data as this remains the primary area that will determine the timing of the Fed’s ‘tapering’ of bond purchases. There has been an upward bias to the dollar reactions so far this year, with firmer data eliciting a stronger (positive) reaction than negative data.

If today’s number is in line with expectations, we’ll be running at a 6-month average of 185k on the headline payrolls number.   The Fed probably wants to see this above 200k before being embarking on reducing the amount of monthly bond purchases.

Latest FX News

GBP: The BoE statement had the effect of convincing interest rate markets that the central bank was not going to increase rates next year, but at the same time stoking fears of higher inflation to come. The pound weakened dramatically and a sustained sub-1.50 on cable does not look far off.

Opinion:  Carney to weaken Sterling further

EUR: The ECB press conference marked a major shift in the ECB’s communication policy, pledging to keep rates at current or lower levels for an extended period. For now, this may replace the more risky policy of moving to a negative deposit rate. The euro has held steady overnight, sustaining the losses seen yesterday.    

JPY: USDJPY still flirting with the 100 level. For the moment, it seems that the market is not keen on piling into the short yen trades once again, which fits with our previously stated view of a much more choppy and two-way market in the yen from here.

AUD: The familiar pattern continues, of lower lows, followed by correction on AUDUSD.   We’re currently in a correction from the low seen on Wednesday (0.9037), but note that each correction has been weaker than the list.

Further reading: 5 Most Predictable Currency Pairs – Q3 2013