Forex today: ECB delivered a less dovish outcome, bullish for EUR

The markets were all about the ECB today that offered a slightly surprising mix between dovish and hawkish rhetoric that supported the view that the EZ economy was improving. Thus, the market sentiment was that the ECB could be heading towards the end of its current programme and easing bias. 

The dollar index was down for the first time in a while, -0.2% while the euro took the show. The euro was supported on the back of the ECB's presser, where Eurozone bond markets jumped on the signals that additional policy measures will probably not be required. The German 10yr yields jumping from 0.37% to 0.43% marking up a one-month high. EUR/USD breached the 1.06 handle momentarily during the presser but fell back to 1.0565 and drifted higher to a current high of 1.0596. 

The exodus and risk-on tone continued and US rates were subsequently higher as well. The US 10yr treasury yields climbed from 2.56% to 2.59% - marking another three-month high. The  2yr yields drifted between 1.35% and 1.37% while markets still expect a 100% chance of a rate hike from the Fed next week. This keeps the pressure on the Yen. EUR/JPY moved up to 121.89 from 120.44 while USD/JPY rose from 114.40 to 114.97 and both marked up six-week highs. EUR/GBP continues on its bear hunt and found the 0.87 handle scoring 18 pips through there for a fresh high since mid-Jan. GBP/USD was good two-way business since London/European trade; Supply  was from a handful of pips below the 1.22 handle down to 1.2131 lows where it reversed the losses back for a double top just below 1.2200. The antipodeans were making fresh two-month lows in the case of the kiwi down to 0.6890 while the Aussie too was sold off to 0.7491 where it now consolidates around the 0.7500.

Day ahead

We have some 2nd tier data from Australia and China, but the main event will be nonfarm payrolls.

Analysts at Nomura explained that the recent ADP employment report indicated that nonfarm private employment increased by 298k jobs from January to February, surprising markets to the upside. "The strength in yesterday's report was broad-based. The goods-producing and service-providing sectors added 106k and 193k jobs, respectively. The manufacturing sector posted a healthy gain of 32k jobs, and the weather-sensitive construction sector added 66k, likely driven by the unusually warm weather."

Analysts at Westpac explained that the Feb non-farm payrolls are forecasted to moderate slightly, the median estimate at 200k (Westpac is at 170k). "From the household survey, the unemployment rate is expected to round down to 4.7%. Payrolls grew 227k in Jan following three months where the average monthly gain was 148k. The average monthly gain over the six months to January 2017 is 183k. A moderation in employment growth has been expected for some time, with both ISM employment indexes having eased back."

Just a reason or two to short the 'March rate hike herd'

Main topics in U.S. session

• Gold extends slide, $1200 in sight
• U.S. Treasury yields extend rise, 10-year yield breaks above 2.6%
• U.S. Treasury bill market poised for high volatility
• EUR/JPY: breaks multiple key daily moving averages, eyes 122 handle
  sma
• AUD/USD testing the descending hourly resistance at 0.7520 and 20 1hr
  post ECB, watching politics from here
• EUR/GBP stuck around 0.87
• ECB: Dovish with a hawkish blend - ING
• DXY inter-markets: looking to Payrolls