Dollar drives higher ahead of NFP

GBP/USD and EUR/USD are lower while the US dollar squeezes higher ahead of the US jobs report at 1.30pm (London time).

Pound and dollar currency
Source: Bloomberg

Sterling slips before jobs data

Sterling is trading sideways against the dollar and the market is expecting low trading volumes and little volatility on the run up the announcement. GBP/USD has been in a downward trend over the past week, and today’s non-farm payrolls announcement will be a turning point as to whether a correction will get under way or whether there will be a continuation of the trend. The recent move we have seen in GBP/USD has been mostly dollar driven, but it is worth noting that the UK services report missed estimates – the services sector accounts for nearly 80% of the British economy.

The UK will release the consumer inflation expectations at 9.30am (London time). The previous reading came in at 2.5%, and should today’s announcement show a dip in CPI expectations it will put pressure on GBP/USD.

The currency pair is encountering resistance at the 50-day moving average at $1.5240, and should this level be held the support at $1.52 will be brought into play. If that mark is punctured $1.51 will become the target. A move above the 50-DMA will bring $1.5260 into sight, and then traders will look to $1.53.

EUR/USD remains weak

The euro is back above the $1.10 mark after briefly dipping below it yesterday for the first time since September 2003. The announcement of the government bond-buying scheme by the European Central Bank yesterday was the trigger for the selloff in the single currency, and there is no sign of a reversal on the horizon.

The eurozone will reveal the revised fourth-quarter GDP at 10am (London time). The consensus is for 0.3%, and should expectations be exceeded it will lead to short-term buying of EUR/USD.

The bias is still to the downside, and the currency pair is receiving support at $1.10. If this level is taken out it will bring $1.09 into sight. However, if $1.10 is held the resistance at $1.1060 will become the target, and beyond that dealers will look to $1.11.

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