Forex snapshot

The euro is back above the $1.26 mark as short covering kicks in before the European Central Bank rate decision and press conference at lunchtime.

Euro and dollar currency
Source: Bloomberg

Sterling has slipped back into its old downward trend versus the US dollar as traders await US jobs data.

All eyes on ECB

The euro is trading at $1.2627. The single currency has been driven as high as $1.2674 in overnight trading as traders square up their positions ahead of the much-awaited interest rate decision and press conference from the ECB, respectively at 12.45pm and 1.30pm (London time). We are not expecting any change in the interest rate; the focus will instead be on Mario Draghi’s statement. We are expecting to hear the details of the asset-backed securities scheme — historically central banks start off with a stimulus package, see it works and add more if required.

A large ABS buying programme and the possibility of more easing to come could push the euro to $1.2520. Resistance is being encountered at $1.2659.

Pound dips below $1.62

The pound is trading at $1.6191. The downbeat manufacturing figures from the UK yesterday are still playing on traders’ minds, adding to the pound’s woes. Shaping traders' views this morning are yesterday's strong US ADP employment figures from the US and the jobless claims report today at 1.30pm (London time). Analysts are estimating that the number of people claiming unemployment in the US will tick up to 299,000 from 293,000. If the reading comes in below the 300,000 mark it bodes well for the US non-farm payrolls tomorrow.

The $1.6230 mark is acting as resistance and a good jobless claim could put the pound on a path to $1.6120.

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