Euro loses post-ECB oomph as focus shifts to U.S. payrolls

Frankfurt (Dec 4)  The euro on Friday partly erased its strong prior-session gain as attention shifted from the disappointing European Central Bank meeting to the upcoming U.S. labor market report.

The euro EURUSD, -0.5301%  declined to $1.0891 from $1.0950 late Thursday in New York, after largely keeping its gains overnight. The bloc’s single currency hit a one-month high of $1.0981 after the ECB on Thursday announced stimulus measures that fell short of market expectations. It was the largest daily move since 2009.

However, the less-aggressive-than-expected easing measures failed to prop up the shared currency for a second day, as traders started to wonder whether the large move was overdone.

“We’re seeing some consolidation from yesterday,” said Vincent Chaigneau, head of FX at Societe Generale.

“The ECB was slightly disappointing, and it’s important because its unusual that [President Mario] Draghi disappoints. Nevertheless, I think the ECB remains fairly dovish. We can’t exclude further easing from the ECB, and I don’t think there’s going to be sustained support for the euro,” he added.

Chaigneau also said focus now turns to the closely watched nonfarm-payrolls report from the U.S., due at 8:30 a.m. Eastern Time, which will be watched for its potential impact on the upcoming Federal Reserve rate decision. A strong jobs figure would bolster the case for the Fed interest-rate increase later this month. It would also widen diverging monetary policies between the U.S. and the eurozone, which could weaken the euro against the dollar.

Read: What to watch in the jobs report for November

Economists predict U.S. nonfarm payrolls will come in at 200,000 in November, while the unemployment rate is forecast to stay around 5%.

“It would take a surprisingly weak number to change the expectations that rates will rise this month,” Chaigneau said.

“If we get a strong report, we could see a pullback in the euro-dollar, while a weak report could trigger further short covering. Technical resistance for the euro is around $1.11-$1.12,” he said.

Janet Yellen says the rate hike is on track

In a hearing on Capitol Hill, Federal Reserve Chairwoman Janet Yellen said that she anticipates interest rates rising soon, in reaction to continued economic growth and higher inflation.

The ICE Dollar Index DXY, +0.33%  was up 0.6% to 98.177, after sliding 2.1% on Thursday.

In other currency-trade pairs, the dollar USDJPY, +0.28%  was at 122.79 yen, up from ¥122.61 late Thursday in New York.

The pound GBPUSD, -0.1651%  fell to $1.5123 from $1.5144, while the Australian dollar AUDUSD, -0.3542%  slipped to $0.7315 from $0.7341.

Source: MarketWatch