The US Dollar, The Japanese Yen & The Euro Ahead Of The NFP

US jobs data takes center stage today. Currency markets are not expecting much action ahead of the US session as traders are in a wait and see mode before the Nonfarm payroll report. Yesterday’s ECB decision and Mario Draghi’s press conference have left the euro a bit stronger but traders a bit more confused. The euro climbed to trade at 1.2669 on Thursday but gave back a good deal of its gains in the early morning session on Friday as the US dollar recovered to trade at 85.85 gaining 12 points.

The ECB’s Governing council was a relatively low key affair. That said, it seems Mr Draghi and his colleagues disappointed some market hopes for a strong signal that further measures would be taken to support the beleaguered economy of the Euro area and thereby push inflation closer to the ECB’s target of under but close to 2%. The immediate market reaction which saw little change in the euro against the Dollar, a slight uptick in bond yields and some modest selling of European equities suggests a fairly dull and marginally disappointing outcome to yesterday’s ECB deliberations. This was likely the desired outcome of the Governing council. However, the movements seen later in the European session‐‐entailing a significant sell‐off in equities and a slight rise in the euro against the US currency‐can’t have been envisaged unless the ECB was anxious to dampen expectations of aggressive further moves in the very near term.

The dollar strengthened for the first time in three days against the yen before a U.S. government report that economists say will show employers added the most jobs in three months in September. The USDJPY is trading at 108.79 recovering 33 points after yesterday’s dollar decline. The pair trading at 108.5 zones. The Dollar Index headed for a seventh weekly gain, its longest run since June 2010, as improving U.S. data adds to speculation the Federal Reserve will raise interest rates next year. The yen fell versus all except one of its 16 major counterparts as the Bank of Japan boosted bill purchases and Governor Haruhiko Kuroda said a weakening currency was unlikely to hurt the economy. The yen declined the most in a week versus the dollar as the Bank of Japan bought a record 3.5 trillion yen ($32.2 billion) in treasury bills, part of its policy of monetary easing to spur inflation.

A weak currency is not a minus for the economy overall and won’t cause problems if it reflects the nation’s fundamentals, Kuroda said in parliament in Tokyo. Prime Minister Shinzo Abe told lawmakers earlier that Japan must help smaller companies cope with the yen’s decline.

U.S. employers added 215,000 workers last month, up from 142,000 in August, according to a Bloomberg News survey of economists before today’s Labor Department report. The jobless rate held at 6.1 percent, matching the lowest level since July 2008, a separate survey showed.

Traders saw a 74 percent chance the Fed will raise its target for overnight lending between banks by its September 2015 meeting, futures data compiled by Bloomberg showed yesterday. Policy makers have kept the target rate in a range of zero to 0.25 percent since 2008 to support the economy. The dollar has jumped 6.6 percent in the past three months, the best performer of 10 developed-nation currencies.