Forex Daily Wrap: USD Continues On From Wednesday's Decline

DAILY FX WRAP – USD plunges over 1% as ADPs print lower than expected, with EUR and GBP both beneficiaries

Price action in the European session has been relatively USD led, with the greenback continuing on from yesterday’s decline, falling over 1% on the day. US ADP Employment Change (169K vs. Exp. 200K, Prev. 189K, Rev. 175K) printed its lowest figure since Jan'14, further heightening focus on Friday’s US Nonfarm Payroll report after last month’s substantially lower than expected number. The USD-index has today breached its 100 DMA at 95.08 to the upside, bolstering key pairs.

EUR/USD rose over 1 point today on the back of USD weakness, breaking above its 100DMA and the 1.1300 handle to reach YTD highs, with the pair also strengthening on the back of better than expected Eurozone Service PMI (54.1 vs. Exp. 53.7 (Prev. 53.7). As well as the European data, EUR was also buoyed by conciliatory comments coming out of Greek talks. Many participants had been preparing for source comments regarding potential haircuts for Greek collateral to obtain ELA funding, however a Greek government official stated early in the session that the country had made its EUR 200mln repayment to the IMF and this was followed by comments throughout the day suggesting talks are progressing.

UK Services PMI (59.5 vs. Exp. 58.5, Prev. 58.9) printed an 8 month high to see GBP/USD end the day firmly in the green in spite of continuing political uncertainty ahead of the UK election. With voters going to the polls tomorrow, there is still considerable uncertainty as to who will be leading the next UK government, however analysts at Citi suggest fears of a minority government are overplayed and there is limited uncertainty due to fiscal similarities in the main parties.

Elsewhere, NZD/USD fell the most since March 6th during the Asia-Pacific session after breaching its 50 and 100 DMAs with EUR/NZD and GBP/NZD both up over 200 pips after Q1 NZ employment report showed soft wage inflation (New Zealand Unemployment Rate 5.8% vs. Exp. 5.5%, Prev. 5.7%, Rev. 5.8%; Average Hourly Earnings 0.2% vs. Exp. 0.9%, Prev. 0.4%), prompting the likes of Deutsche Bank to bring forward their RBNZ rate cut expectations, with the bank now forecasting a cut in both June and July. However, the aforementioned USD weakness saw NZD/USD claw back its losses throughout the European session.

Looking ahead tomorrow sees the electorate vote at the UK general election, weekly US employment data, Norwegian and Czech rate decisions and comments from ECB’s Mersch (Soft Hawk).