EUR/USD (1.4260) The market consensus for today’s US non-farm payroll numbers appear to have tumbled over the course of this week. On Monday, estimates were around 100,000. In the meantime, thanks to a few last-minute analyst downgrades, the consensus may not be much better than 30,000. Market participants seem to have become gloomier about the global recovery in the last few days, probably as a result of continued EU sovereign debt concerns as well as weak manufacturing surveys. The pessimism might have gone too far, given that some commentators are now suggesting the ECB might envisage cutting rates again – a step that should merit only the slimmest of probabilities. Either way, for short-term traders, confirmation or otherwise of the global growth perspective now hangs on the US jobs data. Arguably, expectations could now be so low that the scope for a positive surprise is significant, but we think this is not so because of the proximity of the zero level. The psychological impact of a negative number could result in a highly asymmetric reaction. Imagine a jobs figure of minus 10,000. Although just 40,000 away from the consensus – well within the margin of error – it could have a much more dramatic impact on perceptions than an equally distant figure of plus 70,000.
We still see the euro as broadly neutral, although demand is flimsier now ahead of 1.4090. A move beyond 1.4330 would earn better support.
Market Bias Index
The euro is more generally seen as undervalued now. However the bias is mostly very new and could be as short-lived to the downside as it was to the upside at the start of the week.
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Deutsche Bank
Fixed Income Research – Global