– A weaker NFP risks an unwind of USD longs
USD has been surging against the JPY but losing ground elsewhere, including the EUR, GBP and CAD. While markets have been understandably focused on the central bank announcements (see below for details), today’s NFP report has the potential to shift the immediate attention to the US data. The latest jobless claims added to the recent evidence that some of the US growth momentum seen earlier in the year is starting to ease. An NFP print in line with our 160k forecast (revised down from 190k) would confirm that picture. Note that Fed speakers Evans and Lockhart said they were looking for a run of 200k jobs per month before considering tapering QE. Our US economists suggest that the threshold may be even higher for other key FOMC voters such as Vice Chair Yellen. In our view, this pace will be difficult to achieve on a sustained basis amid the on-going fiscal tightening and we maintain our call for QE at the current pace until the end of the year. A re-think of the Fed still has the potential to shake the markets out of their long USD position (see chart). We maintain a short USDCAD trade recommendation with a target of 0.9935 as the pair hits new low of 1.0105. Our Canadian economist forecasts a flat outcome for Canadian jobs today which should still support CAD given a very strong February reading.
Click here to read the full report: FX Daily
BNP Paribas