EUROPEAN session review: market awaited US data

Data released: 
07:00 GMT Germany Trade Balance s.a. (Dec) €18.5B €17.3B €18.9B 

07:00 GMT Germany Current Account n.s.a. (Dec) €23.5B _ €23.3B 

07:00 GMT Germany Exports (MoM) (Dec) -0.9% 0.8% 0.7% 

07:00 GMT Germany Imports (MoM) (Dec) -0.6% 1.2% -2.3% 

09:30 GMT UK Industrial Production (YoY) (Dec) 1.8% 2.3% 2.1% 

09:30 GMT UK Industrial Production (MoM) (Dec) 0.4% 0.6% -0.1% 

09:30 GMT UK Manufacturing Production (MoM) (Dec) 0.3% 0.6% -0.1% 

09:30 GMT UK Manufacturing Production (YoY) (Dec) 1.5% 2.3% 2.2% 

09:30 GMT UK Total Trade Balance (Dec) £-1.026B _ £-3.582B 

09:30 GMT UK Goods Trade Balance (Dec) £-7.717B £-9.300B £-9.783B 

09:30 GMT UK Trade Balance; non-EU (Dec) £-2.198B £-3.100B £-3.048B 

The main currencies stay in the narrow ranges waiting for US data. According to experts’ opinion, the uncertainty around the January employment report is high given the potential distortions from the weather. We forecast nonfarm payrolls to increase 185,000, an improvement from the 74,000 gain in December, but still somewhat below the recent trend. The unemployment rate is likely to slip to 6.6% from 6.7%. 

EURO 

The euro trades in the narrow range after the European Central Bank (ECB) left its main lending rate unchanged, but the currency then recovered its losses after ECB President Mario Draghi stressed that there is no deflation in the region and the central bank would take further decisive action if needed. 

EUR/USD trades around $1.3580. The initial support remains at recent lows on $1.3480. Below support comes at $1.3400 (Nov 21 lows). Initial resistance comes at $1.3620 and $1.3680. 

POUND 

UK Goods Trade deficit narrowed to £-7.717 billion in December from £-9.783 billion in November. Analysts expected the deficit to narrow only to £-9.300 billion. 

Total Trade deficit narrowed to £-1.026 billion in December from £-3.582 billion in November. 

UK Trade deficit non-EU narrowed to £-2.198 billion from £-3.100 billion and above expectations of narrowing to £-3.048 billion. 

The National Institute for Social and Economic Research said the UK’s economic recovery has become “entrenched”. 

NIESR also said it expected unemployment to fall below 7% before the end of the year. NIESR expects consumer spending to remain the key driver of recovery in 2014 and 2015, supported by continued buoyancy in the housing market. 

The NIESR said it now forecasts a rise in interest rates as early as the second quarter of 2015, though this is expected to be a year after the 7% threshold is breached. 

GBP/USD stays at $1.6340. Now resistance comes at $1.6440 (Jan 30 lows) and $1.6520. The initial support comes at $1.6300 and $1.6250. Break below $1.6250 widens losses to $1.6200 (channel line from Oct 10). 

YEN 

The yen consolidates within the narrow range before US data. 

USD/JPY is at Y102.20. Initial support comes at Y101.20 (yesterday’s lows), then - at Y101.00. Above session high resistance comes at Jan 31 high on Y102.90/00, then - at Y103.40 (Jan 28 high). 

DATA AHEAD 

At 13:30 GMT US Nonfarm Payrolls (185K vs 74K). Unemployment Rate is expected to stay at 6.7%.

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