Bearish Momentum To Continue? All Eyes On NFP Numbers

Dear Traders,

Yesterday’s Super Thursday disappointed the market’s expectations with the Bank of England’s moderate inflation expectations making a potential rate hike this year less likely. Sterling bulls have hoped for a change in the central bank’s policy stance as well as higher inflation forecasts. However, the opposite turned out to be the case: While growth forecasts were raised slightly higher, inflation forecasts for 2017 were lowered down to 2.7% from 2.8%. Furthermore there was no change in the BoE’s monetary policy stance as Brexit and Trump lead to uncertainty, making it difficult for the BoE to consider higher rates anytime soon.

The pound dropped in response to the ‘less-hawkish’ statement and is currently hovering just above the 1.25 level. From a technical perspective, we now expect further near-term losses in the GBP/USD and still focus on a break below 1.24. Lower targets could be at 1.23 and 1.2270.

The euro traded confined to a narrow 80-pips trading range. While a break above 1.0810 failed to provide any sustained profit, bearish momentum appears to be not yet enough to push the euro significantly lower. We recommend waiting for a break below 1.0730 in order to sell euros towards 1.0680.

Today’s price action will however mainly hinge on the outcome of the U.S. Non-Farm Payrolls report scheduled for release at 13:30 UTC. Economists expect a 175,000 increase in payrolls for January with unemployment likely to remain relatively stable. The focus will also be on wage pressures.

We wish you good trades and a beautiful weekend.

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