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The forex market was relatively calm during the morning London session, likely because traders were bracing themselves for the NFP report.

The session wasn’t a complete snooze fest, though, since the Greenback was nudged higher while the Loonie encountered some sellers.

  • Spanish unemployment change: 63.77 vs. 50.3 expected, -61.5K previous
  • U.K. construction PMI: 50.2 vs. 52.0 expected, 52.2 previous
  • Euro Zone PPI m/m: 0.2% as expected, 0.6% previous
  • U.S. NFP report report coming up

Major Events/Reports

NFP Friday!

Today is another U.S. non-farm payrolls (NFP) Friday!

Under normal circumstances, volatility and directional movement are both in short supply as traders hunker down ahead of the report.

And today was certainly a very normal day since most currency pairs were milling about in tight ranges, with many closing flat for the session.

Oh, if you haven’t already, then make sure to check out Forex Gump’s Event Preview for the upcoming NFP report, especially if you want to trade the even and need to quickly get up to speed on what happened last time and what’s expected this time around.

U.K.construction PMI

The U.K.’s latest construction PMI report was released earlier during the session.

And like yesterday’s manufacturing PMI report, today’s construction PMI report was a disappointment since the headline reading for January dropped from 52.2 to a four-month low of 50.2. This is a faster decline compared to the consensus that the reading would only slightly weaken to 52.0.

According to Markit, the deterioration was due to “A return to contraction in residential building activity,” which was “accompanied by near-stagnant commercial and civil engineering activity.”

Moreover, “New orders declined, linked by many companies to market uncertainty.”

And the pain doesn’t stop there since “The rate of job creation eased to an 18-month low in line with the reduced growth of building activity.”

Severe risk-aversion in Europe

The major European equity indices were broadly and deeply in the red during the morning London session, which clearly showed that risk aversion was the dominant sentiment in Europe.

And market analysts blamed the risk-off vibes on the surge in global bond yields, which herald higher borrowing costs down the road.

And the surge in global bond yields, in turn, was blamed on higher inflation expectations after the FOMC statement, as well as reinforced expectations that the Fed will continue to hike rates this year and speculation that the ECB would also be tightening policy sooner or later.

  • The pan-European FTSEurofirst 300 was down by 1.00% to 1,529.09
  • Germany’s DAX was down by 1.21% to 12,846.50
  • The blue-chip Euro Stoxx 50 was down by 0.95% to 3,536.50

U.S. equity futures were also suffering, hinting that the risk-off vibes will likely carry over into the U.S. session. Although that may change, depending on how the NFP report turns out.

  • S&P 500 futures were down by 0.72% to 2,802.25
  • Nasdaq futures were down by 0.71% to 6,849.00

Major Market Mover(s):

USD

Price action on the Greenback was actually relatively subdued. Even so, the Greenback is worth noting since it was nudged higher across the board ahead of the NFP report.

There were no apparent catalysts for the Greenback’s broad-based rise, but preemptive buying and/or short-covering ahead of the NFP report are possible reasons.

EUR/USD was down by 18 pips (-0.15%) to 1.2490, AUD/USD was down by 17 pips (-0.22%) to 0.7988, GBP/USD was down by 28 pips (-0.20%) to 1.4218

CAD

The Loonie was the worst-performing currency of the morning London session.

There weren’t really any negative news or economic reports related to Canada, but oil was in decline (as can be seen below), and it looks like the Loonie was tracking the slide in oil prices.

USD/CAD was up by 34 pips (+0.28%) to 1.2316, EUR/CAD was up by 19 pips (+0.13%) to 1.5383, NZD/CAD was up by 13 pips (+0.15%) to 0.9064

USD/CAD (Inverted) vs. U.S. Oil (Black Line): 15-Minute Chart
USD/CAD (Inverted) vs. U.S. Oil (Black Line): 15-Minute Chart

Watch Out For:

  • 1:30 pm GMT: U.S. non-farm payrolls (+180K expected, +148K previous), jobless rate (steady at 4.1% expected), and average hourly earnings (0.2% expected, 0.3% previous)
  • 3:00 pm GMT: University of Michigan’s revised consumer sentiment index (95.0 expected, 94.4 previous)
  • 3:00 pm GMT: U.S. factory orders (1.5% expected, 1.3% previous)
  • 7:30 pm GMT: San Francisco Fed President John Williams is scheduled to speak