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Forex: Remaining nervous

As always, the desire is for clarity from the US jobs numbers. The reality is that we are only slightly wiser after the event. The headline establishment survey number was stronger than expected at 175k, with positive prior month revisions, whilst the unemployment rate (based on a survey of households), nudged higher to 6.7%. The underlying details suggested that the weather did not have a major impact. The message from Fed officials (latest being Plosser) is that the hurdle to adjusting the current pace of asset purchases remains high, so for the time being the market remains convinced that further tapering is likely at the next Fed meeting on 19th March.

The start of this week is seeing the focus on China and the disappointing trade data released over the weekend. Exports were down 18% in annual terms, from having rising 10.6% in January. It’s likely that some of this is down to the lunar new year holiday (which was later this year vs. 2013), so markets did treat the numbers with an air of caution. The reference rate for the yuan was set lower, back to levels seen early December on USDCNY. Overall, the feeling is that we are going to see another week of nervous trading, both emanating from events in China, but also the ongoing tensions with regards to tensions in the Ukraine.

In Europe, it is sterling and the euro that are catching the eye on the charts. After the ECB meeting of last week, where no fresh hints of further policy easing to come were given, the single currency has moved further to the 1.40 level on EURUSD and pushed a 1 month high on EURGBP. On sterling, we are seeing early weakness on cable, dipping below the 1.6700 level.

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