There was still solid US dollar buying support at lower levels in Asian trading on Friday given favourable yield spreads over the yen. The Bank of Japan will hold its latest policy meeting next week amid expectations that policy will eventually be expanded further even with a consensus of no change this time around as policymakers wait to asses the impact of higher sales tax. USD/JPY maintained a bid tone and consolidated just below the 104.00 level.
Activity was inevitably restrained during the European session ahead of the pivotal US payrolls release. As far as EUR/USD was concerned, there was also a large option expiry at the 1.3700 level due in the New York session which served to tighten the shackles surrounding the pair.
The recent sharp moves in Euro-zone bond yields was highlighted by a drop in Spanish 5-year yields to below equivalent US yields for the first time since 2007.
There was a weaker than expected monthly reading for the UK Halifax house-price index which did not have a significant impact given that annual indicators still suggested solid growth. GBP/USD tested support below 1.66 with some choppy prices action triggered by moves on the EUR/GBP cross.
The dollar maintained a solid tone into the payrolls release with being able to break any major support levels as dealers positioning for a robust release. In the event, the headline employment increase was marginally below consensus expectations with an increase of 192,000 for March while the unemployment rate was unchanged at 6.7%. There was an upward revision to February’s payrolls estimate to 197,000 from 175,000 which helped underpin sentiment and the overall data was broadly encouraging with a rising participation rate.
Inevitably, there was very choppy trading following the data with EUR/USD fluctuating around the 1.3700 area. There was initial support below the 1.3690 level as the dollar struggled due to the weight of expectations into the release. USD/JPY was unable to sustain a move above the 104.0 level and retreated to lows around 103.70 as US equity markets retreated sharply at the open.
GBP/USD found support on approach to 1.6550 even with the underlying performance unconvincing while reports that the ECB had modelled up to EUR1trn in bond purchases briefly pushed EUR/USD to fresh 1-month lows around 1.3675 late in Europe.