Asian equities gained overnight, extending the firm tone from European and US markets, on news of an agreement between US President Trump and North Korean leader Kim Jong Un to meet in what would be an unprecedented summit.
Equities were further bolstered from optimism that President Trump’s tariffs on steel and aluminum allowed for some exceptions (Canada and Mexico for now).
Headlines saw USDJPY trade back above short term resistance at 106.50, to a 106.945 high.
The ECB kept its policy and forward guidance unchanged as expected, but decided unanimously to remove the explicit pledge to increase the asset purchase program if needed.
EURUSD rallied initially on the slightly more hawkish than expected ECB statement but dropped substantially after ECB President Draghi downgraded inflation forecasts and referred to concerns surrounding protectionism. EURUSD ended the day lower as a result.
GBPUSD also underperformed after the ECB lowered its inflation forecasts at yesterday’s meeting. The negative sentiment was further fueled by Brexit headlines suggesting that a Brexit deal may take longer than currently expected, prompting GBPUSD to dip below 1.3800.
Today we get the Industrial Production and Manufacturing print but UK data is likely to remain a secondary market mover in comparison to political headlines and broader USD and risk sentiment. GBPUSD support comes at 1.3780, while resistance lies at 1.3950.
Today’s focus lies on the US February employment report at 13.30, where the market will particularly watch the wage component as it may provide some information on inflation and possible faster Fed tightening. Barclays Research expect “… another month of solid job creation (200k), but average hourly earnings growth should slow to 2.7% y/y”.