The USD made gains against EUR, GBP and other European currencies yesterday, while the commodity currencies held relatively better, said analysts at Lloyds Bank.
This could be market positioning ahead of US payrolls. While the ADP employment report was marginally weaker than expected, the non-manufacturing ISM was firm. Furthermore, the employment component rose sharply to its highest level since October after declining for three consecutive months. This should be supportive for market expectations of a decent payroll report on Friday.
For EUR/USD today, they noted that US factory orders could attract some attention; however, we expect the ECB press conference to be the main focus today. The updated staff projections and comments surrounding Greece and when they plan to restore full access to open-market operations to its banks will be of interest.
They also noted that while we are likely to get the remaining detail of the QE programme, we believe ECB QE is now largely discounted and therefore there is unlikely to be anything new that will drive EUR significantly lower. However, with the USD likely to hold firm ahead of Friday, we see risks remain to the downside for EUR/USD. The 1.0990/1.1020 area looks likely to provide some initial support.
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