EUR/USD: This Is Only A Temporary Calm Before Powell, The NFP

  • EUR/USD stabilizes in the familiar ranges after the flash crash storm.
  • The Non-Farm Payrolls competes with Powell’s speech for attention.
  • The technical picture is slightly bearish for the pair.

EUR/USD kicks off the first jobs Friday in 2019 in a stable state after the flash crash storm. The plunge to 1.1310 proved to be a knee-jerk, and the world’s most popular currency pair is back to “hugging” 1.1400.

The greenback weakened on Thursday due to three factors: concerns about the Chinese economy were joined by a considerable drop in the forward-looking ISM Manufacturing PMI. The plummet to 54.1 points represents a sharp slowdown in early 2019.

Perhaps more importantly, FOMC member Robert Kaplan said he would not support rate hikes in the next “couple of quarters” and also opened the door to reversing the balance sheet runoff, or Quantitative Tightening. After the recent rate decision, Fed Chair Jerome Powell said that the reduction of the balance sheet would continue “autopilot.”

Was Kaplan speaking for himself or has Powell changed his mind? The world’s most powerful central banker will speak at 15:15 GMT in Atlanta alongside his predecessors Yellen and Bernanke. His speech may steal the show from the Non-Farm Payrolls.

The NFP carries expectations for an increase of 177,00 jobs in December, and real expectations may be higher after the ADP Non-Farm Payrolls beat with a whopping increase of 271,000 positions in the private sector. An upbeat NFP may boost the greenback but could hurt markets that may prefer bad news this time. A weakening economy may convince the Fed to ease its policy, thus supporting stocks.

Wages carry expectations for an increase of 0.3% MoM and 3.1% YoY. A surprising deceleration in salaries could have the same effect as a meager increase in jobs.

Back in the old continent, preliminary inflation figures for December are projected to show a slowdown in the headline Consumer Price Index from 2% to 1.8% due to falling oil prices. Core CPI is expected to remain unchanged at 1%.

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