Global equity markets generally fell yesterday led by the German DAX which dropped by almost 1.5% whilst government bond yields rose. The German 10y yield climbed to the highest level since 2015 amid ECB tightening expectations which lifted EUR to new multi-year highs versus USD.
Asian equity indices are mostly lower as of midday local time and JPY fell overnight after the BoJ reaffirmed its commitment to buy JGBs in order to keep yields contained.
GBPUSD price action was dominated by weaker USD sentiment yesterday as Brexit negotiations have fallen out of the spotlight for now with PM May still in China.
UK manufacturing PMI continued to edge lower from the multi-year highs reached in Nov-17 after output and new orders both declined but the print had little impact on markets.
GBPUSD short-term support comes in at 1.4190 ahead of 1.420 with resistance at 1.4280 and 1.4350. In EURGBP, support remains at 0.8685 with resistance at 0.8835.
In Germany, the IG Metall union has called for their members to go on strike after employers refused to enact the union’s demand for an 8% pay rise over a 27 month period and a reduction in weekly work hours to 28 from 35. The strike is expected to impact around 260 companies.
Today’s key event in markets is the release of US nonfarm payrolls at 13.30 London time. Barclays Research expects a gain of 175k in the headline number, a decline in the unemployment rate from 4.1% to 4.0% and a rise in average hourly earnings by 2.6% y/y.
A strong job report today could vindicate Barclays Research’s out of consensus call for four Fed rate hikes this year versus the median FOMC dot plot of three hikes and market pricing of less than three hikes.